The prices of raw materials, especially precious metals, have strongly affected. It is worth considering such investments seriously.
At the beginning of March, better than expected macro data came from across the ocean – the economic slowdown is therefore lower than forecast, but further Fed movements remain in the sphere of speculation. Still a lot depends on American-Chinese negotiations. One thing is certain – there will be a lot going on in the commodity market, especially on metals and oil.
There is also a certain downturn in the grain market, especially wheat, whose exports from the United States have decreased, and the forecasts indicate high yields this year. The wheat contracts have already lost 13.2 percent in the last month. High yields will also not favor cocoa prices.
Analysts are most excited about oil. It can be concluded that the forecasts are not much less than investment banks issuing them. The situation is also complicated. The Brent crude oil prices should be favored by the reduction of production by the countries associated in OPEC, the decline of supplies from Venezuela and Iran, and the recent reduction in production by Russia, which last year announced cuts, has just begun to implement and announces their further implementation. Norway also announced a prediction of reduced oil and gas production.
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The decline in crude oil prices may, however, be influenced by the announcement of an increase in WTI oil production and the reaction of OPEC to Trump’s demands to limit the Brent oil production cut.
Valuations for oil are also different and change from month to month. The most optimistic were at the end of last year. The average of analysts forecasted by Bloomberg agency was $ 70 a barrel. Bank of America Merrill Lynch, who also expects such a price, believes that the peak of quotations will fall on the second quarter. Morgan Stanley puts an average price of $ 68.5 a barrel. The most optimistic is Citibank, which limits its forecasts to 60 dollars. However, whatever the forecast would be, the winners will be speculative investors who earn the most from market volatility by investing in futures and contracts for exchange rate differences.
Metal is a much more reliable investment for a long time, despite the recent realization of profits from them. Until now, the most could have been made on palladium and copper , which at LME climbed this year to the heights. While in the case of the first metal, the forecasts are still good, in the case of the second metal, it all depends on reaching an agreement on the US-China line and next PMI readings from the Chinese manufacturing sector.
Analysts expect that the political and economic situation will also affect the price of gold, which after the recent declines in quotations started in March the lowest valuation since January. Silver also awaits the rebound of last year’s declines, which after this year’s growth began to fall at the turn of February and March. Analysts, however, still believe that metal should go up to $ 17 an ounce. At a rate of $ 5.12, it means almost 12.5 percent. increase in prices.
Pallad traveled more than 28 percent during the first two months of the year and for the first time in 16 years, he beat the price with gold – it cost $ 1,522 per ounce, almost $ 200 more than the yellow bullion. Fig. shutterstock
Less flash, more profit
Pallad traveled more than 28 percent during the first two months of the year and for the first time in 16 years, he beat the price with gold – it cost $ 1,522 per ounce, almost $ 200 more than the yellow bullion. It was possible to earn 25% on WTI crude oil, almost 24% on Brent crude and 12.5% on copper. Metal and other raw materials were favored by the silence of storm moods between the United States.
The good streak of palladium, despite the decline in its supply, however, depends not only on its shortage with simultaneous increase in demand, but also, and perhaps even above all, on the volume of car sales. Metal is used for the production of catalysts in gasoline engines and increasingly popular hybrid cars. It is different with platinum, which plays a large role in diesel engines, and the demand for these cars falls even in Poland. Palladium, like other raw materials, can be invested in several ways. The least convenient is to buy metal in the form of bullion bars or coins, which are mainly produced by the Canadian mint.
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The famous Canadian Maple Leaf made of platinum for the first time was stamped in 1988, from palladium in 2005 – all discs were in special editions and small editions. To this day, platinum koalas are beaten by the Australian Perth Mint. Investing in such coins can be a pleasure, but just like in bars, it is not practical, especially if you want to invest more capital or invest for years.
It is much more practical to choose a different method of investing in metals.
You can do this by buying, for example, forward contracts, exchange rate differences, structured certificates, shares of mines and units of Polish investment funds or shares in ETFs, such as ETFS Physical Palladium (PHPD), which is directly linked to the palladium quotations. This year it was possible to earn over 30% in it, almost 130% in the last three years, and from the beginning of its activity, ie for a decade, despite the collapse of Palladium quotations in 2016 – 382%. ETFs are also the closest investments in raw materials.
Gold only on paper
However, the spectacular increase in quotations should not suggest that all investments in palladium are equally profitable. Each method is also burdened with other risks.
Supporters of stock market investments must take into account that the shares of such mines as the American Stillwater Mining Company or the Canadian North American Palladium do not always reflect the valuation of raw materials, because the valuation of such companies depends not only on the prices of raw materials, but also on margins. You also have to take into account the costs. Investments on foreign exchanges are not cheap. The offer of our brokerage houses is also limited. It is easier to invest in domestic or foreign funds that are available in Poland.
The offer is diverse – from gold funds, to energy investing in a wide spectrum of goods – energy raw materials, metals or agricultural commodities. However, before you make a decision, it’s worth taking some time to look at the benchmarks of the funds and their portfolios, which will tell you what resources you have to deal with.
The most popular indicators include: Bloomberg Commodity, Dow Jones UBS Commodity, R euters / Jefferies CRB, S & P Goldman Sachs Commodity. The first and the second have in the portfolio of 22 futures contracts for goods from seven sectors, and the last one can take into account all, so it has the largest spectrum of investments. Each of the so-called funds raw materials differs in the investment strategy. Most often, managers buy shares of producer companies. It is difficult to talk about direct investment, for example in metals, oil or other goods.
A unit instead of an ounce
In the Franklin Gold and Precious Metals portfolio, for example, there are mainly shares of such gold producers as: AngloGold Ashanti Limited, the Canadian B2Gold Corp. or the Canadian Newcrest Mining Limited. Some managers, in addition to equity investments, also invest in ETFs, which aim to reflect the selected commodity market index. This type of strategy applies, among others Treasury of Raw Materials. However, Investor Gold focuses on participation units issued by the Deutsche Invest I Gold and Precious Metals Equities foreign sub-fund. The funds closest to the raw materials are those that use term contracts. Here the profit depends on whether the prices of the underlying instrument, for example platinum or palladium, move in accordance with the direction of the position being occupied. The fund also earns interest on a security deposit. Often the rate of return is strengthened with a lever, but here the risk increases even more.
You can also try to buy futures on the New York or Tokyo Stock Exchange through a brokerage platform . In New York, a single contract includes 100 ounces of palladium, and in Tokyo 0.5 kg of ore. All you need to do is open an account at one of the brokerage houses that operate on the forex market.
However, investing in futures requires a lot of experience , as well as contracts for exchange rate differences. Investments in structured certificates listed on the Warsaw Stock Exchange are simpler and less risky. You can choose papers that are a basket of several raw materials or are dependent only on the quotations of one contract. The simplest are Trackers such as RCNMBAOPEN – precious metal basket, in which there is gold, palladium, platinum and silver, RCGLDAOPEN depend on gold futures and RCSILAOPEN on silver. In this way, you can also invest in oil, cereals, sugar, cocoa, coffee, natural gas and many other raw materials.