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29.06.202013:55 Forex Analysis & Reviews: Commodities: outlook for second half of 2020 remains troubling

Przegląd długoterminowy

Exchange Rates 29.06.2020 analysis

Coronavirus pandemic has negatively affected markets. So, in the first six months, prices of most commodity assets slumped. Nevertheless, the next six months could also be difficult. Market could face the second wave of COVID-19 and an active presidential race in the United States. This, in turn, may have an impact on oil, gas, gold, copper, and other commodity assets prices.

Oil

During six months, oil prices were falling and rising. At first, quotes collapsed due to disagreements between Russia and Saudi Arabia. Then the coronavirus pandemic made oil prices nosedive. May WTI oil futures fell below zero and reached $-40 per barrel for the first time in history. However, in just two months, oil prices reached $40 per barrel.

It is hard to say what oil prices should expect in the second half of the year. It depends on how COVID-19 would develop. Perhaps demand will recover amid the global reviving from the quarantine. Or, on the contrary, demand may collapse due to the second wave of coronavirus.

Gold

Gold rose in price by 16% in six months due to increasing demand for safe-haven assets and the unlimited printing of money by the Fed. Goldman Sachs experts suggest that gold prices could reach $2,000 per ounce in the next 12 months. However, experts at Capital Economics, on the contrary, expect a drop in gold prices amid falling demand for defensive assets.

Copper

Experts suggest that the price of this industrial metal may grow despite a worsening epidemiological situation in the world. Jefferies analysts note that in the largest countries of the world there was a shortage of copper supply even during quarantine because not all employees returned to work. That is why the level of scrap recycling remains extremely low.

Copper is quite popular in China because it is used in a huge amount of goods from automobiles to electronics. Experts consider copper the most attractive commodity.

Natural gas

A fall in demand for the "blue fuel" amid the spread of COVID-19 has led to lower prices. However, the situation could improve as winter will begin soon in the Northern Hemisphere and gas will be needed for heating. Nevertheless, the European gas storage facilities are already full by 78%. Analysts warn that their quick filling could lead gas prices to zero or even lower, as happened with May WTI oil futures.

Iron ore

Iron ore prices rose due to low supply and high demand from China, where steel production reached record levels. However, Morgan Stanley suggests an oversupply in the second half of the year and iron ore prices will return to $80.

Kate Smirnova,
Ekspert analityczny InstaForex
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