Jonathan Barratt: It is not really that surprising. I guess with Donald Trump coming in and perhaps Elon Musk also having a bit of a go as well, the US dollar has gone up and it really is all about the US dollar at the moment when it comes to commodities. That inverse relationship is hurting a lot of the things that we adhere to, like the price of the precious metal markets and also the base metal markets.
You said there is dollar strength as well and it is weighing heavy on these commodity prices. But let us talk about gold because two weeks ago, the only thing that we were talking about was gold surpassing fresh record highs day after day. Where do you see gold headed right now? Will it get its sheen back when we enter the new calendar year?
Jonathan Barratt: I think it will. But at the moment, it is all about the dollar. The US dollar index is trading around 106.50. Now, that is on critical technical resistance on the top side. And if it breaks through that, then it is all about the US dollar. I guess the concern that we do hold is the market remains very long in the precious metal sector and if people are just looking to go straight to the US dollars, that is going to make a bit of a fallout for gold.
I thought gold around this level was good support, but we broke through and we are breaking through it at the moment. So, there is more downside there, but it is still a risk in the market. So, I would be looking for a low and then trying to get back into a long position. But at the moment, better be on the sidelines or short because there is more on the downside.I do not know if you have gone through the latest World Bank projection because that is quite interesting, especially on crude. While they are saying that metals and agriculture are going to stabilise after a knee-jerk reaction, it is oil prices which will decline quite a fair bit, about $80 per barrel for 2024 and then drop all the way to $73 next year.
Jonathan Barratt: It is very hard to put that sort of projection in play. But one thing we do know is that the moment production is up, Donald Trump is going to have his shoulder to the pump there and continue to frack. So, I get a sense that the US is going to keep producing. They are the number one producer in the world at the moment.
Whilst we are seeing that supply without a pickup in economic activity, oil prices will remain on the soft side. We did have a bounce last night and we are at intermediate support, but down the track, we will see it lower. Now, I think that is also dependent on China’s economy and the stimulus packages that come out. China is an importer and we like to see demand coming through from China, but we are still seeing problems with the economy there and the problem is as long as economic activity remains soft, so will the demand for oil. That is a bit of a concern to me. But lower oil prices will be a godsend for countries, particularly India, that needs to import the commodity.
What is your outlook on copper because China’s copper smelters are planning to cut output next year. We have seen a sharp correction in copper prices. Where do you see all of these metals, which are very crucial in the industrial space?
Jonathan Barratt: I have always liked copper. At the moment, the environment is not right to buy it. But I think that with the EV space evolving, the demand for copper will remain. Remember, we can flip very quickly into a deficit, but it really is about economic activity, and when that picks up. I do like the driving force for copper from China and that should help to hold up prices. But once again it is more to do with where the US dollar is and what the US dollar is doing that will dictate that for the time being.
