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Gold, Silver, Crude Oil, Zinc prices likely to remain under pressure throughout 2014

Gold, Silver, Crude Oil, Zinc prices likely to remain under pressure throughout 2014

Usman Ahmed,

Commodity prices are poised for more losses in 2014 as many factors that were responsible for hike in prices are now seem diminishing; Gold can be the biggest looser at the end of current year as per macroeconomic scenario.

Gold which surged to $1918 per ounce in 2011, recording more than 600% gain from 2001 to 2011, was nosedived to $1180 / ounce last year with a huge 28% yearly drop, the biggest one year slump in nearly 31 years.

gold_silver_crude_oil_zinc_body_Picture_2.png, Gold, Silver, Crude Oil, Zinc prices likely to remain under pressure throughout 2014

One of the main factors responsible for strong bullish momentum in Gold price during the first decade of 21st century was recession in developed countries including the US. Gold had become a “safe heaven” for investors who wanted to secure their investment. However when we saw some significant recovery in the US and other developed economies in 2013, investors shunned Gold and moved towards other assets that consequently caused boom in stocks and losses in Gold. Other notable factors such as weak American Dollar and significant reduction in gold demand from India also contributed to aggravate the price fall.

Silver also followed the footsteps of gold and posted a whopping 36% yearly fall in 2013, thus crashing the price from $30 to $20 per ounce. Reasons were very much similar as mentioned above.

gold_silver_crude_oil_zinc_body_Picture_1.png, Gold, Silver, Crude Oil, Zinc prices likely to remain under pressure throughout 2014

Not just precious metals, story is same for almost every metal. In 2013 commodities from corn to nickel showed first 12-month decline in more than five years due to better supply and reduction in demand.

Crude oil is also expected to remain under bearish pressure throughout 2014 due to several factors such as OPEC’s increased spare capacity, non-OPEC capacity and hike in dollar’s value thanks to Fed decision to get rid of stimulus as economy recovers. A recent agreement that would allow Iran to resume exports may also increase downside risk in oil price.

Zinc however may perform relatively better in 2014 due to supply concerns. Surplus of refined Zinc is likely to narrow down this year, and the commodity may fell into deficit in 2015, first time in nearly a decade, according to a report released by Barclays. The bank sees average price of Zinc at $2138 / tonne this year.

About copper, the bank says it may post surplus in ongoing year, thus affecting the price negatively. It is pertinent that we have recently observed some losses in copper after China’s money supply and bank lending reports posted worse than expected readings. China is copper’s biggest consumer and according to last year statistics the Asian nation used 40% of world’s total copper consumption.

As we mentioned above that weak dollar was one of the main reasons that kept commodities under pressure last year, this factor is likely to keep playing its role in 2014 but in reverse manner. The US economy grew faster than expected in third quarter and the country’s jobless rate fell to 6.7%, the lowest level since 2008. These positive developments would encourage FOMC policymakers to scale back unprecedented stimulus faster than previously anticipated that in turn may strengthen the US dollar.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.