London, 12 January 2014
2014 could prove to be a fairly positive year for commodities according to Barclays, with global growth expected to move higher and the pace of commodity supply growth likely to ease. Tapering is unlikely to depress commodity prices, especially if expectations of stronger US growth come to fruition. The exceptions to this are gold and silver prices, which are likely to head lower as tail risks fade. On a relative sectoral basis, Barclays view base metals more positively vis-á-vis precious metals.
Key Findings: Barclays Commodities
• Supply risks are likely to dominate metals markets with Indonesia’s ore export ban to be implemented from 12 January. Nickel is likely to be the most vulnerable, and if the ban remains in place for long it will create a supply shock. High nickel stocks will be a finite buffer, but we think that nickel looks undervalued.
• We have lowered our 2014 precious metals forecasts. We expect gold prices to test fresh 2010 lows this year, averaging $1205/oz. A projected bloated surplus is likely to weigh on silver and we forecast prices to average $19/oz. We expect platinum to deliver another deficit this year, aiding firmer prices, and we forecast a 2014 average of $1539/oz. Palladium is likely to retain its crown as the best performing precious metal but, absent a new catalyst, gains are likely to be modest, given stock levels. We forecast prices to average $768/oz.
"A key supportive dynamic for commodity markets is that the global growth outlook has turned more positive. Barclays’ economists forecast global GDP growth in 2014 at 3.4%, up from 2.9% in 2013. Their forecast for emerging market GDP growth is 5%, up from 4.7% last year while the forecast for BRIC GDP is unchanged y/y at 5.8%. While global growth is not quite at levels that would warrant a sustained and broad-based rise across commodities, it is an improvement from 2012 and 2013. Within the global growth picture, the role of China in driving commodity demand cannot be emphasised enough. While our economists forecast China’s 2014 GDP growth to slow to 7.2% (from 7.7% in 2013), risks of a hard landing of the Chinese economy, which weighed on commodities in Q2 last year, have faded."