Gold and silver should see a mild recovery & Oil outlook looks stable: Saxo Bank

DUBAI-MIDDLE-EAST (Aug 17)  The commodities sector looks set for a relatively benign near-term future according to Saxo Bank, the multi-asset trading and investment specialist.

Gold and silver should see a mild recovery over the next quarter and oil looks set to remain at current levels. Saxo Bank believes that changing supply and demand fundamentals are creating strong headwinds for commodities.

Due to optimal growth conditions across Europe and the US the bank expects agricultural sector prices to fall, which is consistent with a growing supply.

The global oil outlook looks stable and a trend towards retrenchment in emerging markets and the risk of geopolitical disruption remains. However any upside potential from smaller supply side disruptions should be mitigated by the spare capacity achieved from declining demand growth and increasing supply from countries such as the US, Canada and Brazil.

Ole Sloth Hansen, Head of Commodity Strategy at Saxo Bank, said, “Elevated speculative positioning in crude oil poses a more substantial risk, particularly with uncertainty over the economic strength of the US and China. Any worsening of growth outlooks for either country may trigger long-term liquidation.”

A strong sell-off in precious metals happened in the last few quarters as investors sought greater returns, but Saxo Bank sees the potential for gold to reach $1,450 per ounce over the coming months. With physical demand from Asia and emerging economies remaining robust, there is potential for some investors to take advantage of lower prices, especially if opportunities in other asset classes prove harder to find.

Ole Sloth Hansen added, “At the beginning of the year, gold was still regarded as a potential strong performer in 2013. The sharp reversal that followed caught most off-guard, resulting in some painful losses and lack of appetite to re-enter the market.”