Commodities: Moving higher, but they won’t fly too close to the sun just yet - TDS

Analysts at TDS point out that oil is building on gains, gold bouncing up and zinc, silver and platinum all outperforming into 2017.

Key Quotes

“Following a respectable showing this year, the commodity complex rally is in no danger of following the fabled Icarus too close to the sun in 2018. With crude oil getting strength from OPEC production discipline, less US supply optimism, shrinking inventories and synchronized global growth lifting demand, the broad commodity complex will have a powerful ally in energy as it moves higher over the next twelve months.” 

“A gentle Fed tightening cycle, at a time when the ECB, PBoC, and other central banks are set to start removing some of their monetary accommodation, should sap some strength from the USD as 2018, which likely means that gold and other precious metals will be supported by the currency market. Still low real rates, along with investor desire to hedge in the face of fully valued equity markets should also assist commodity prices to move broadly higher.” 

“Even base metals, which look toppy following their 25 percent jump so far this year, are unlikely to be a powerful force keeping the commodity complex from finishing higher next year — firm China/emerging market growth will be synchronized with the industrial world for the first time since the great recession and lackluster supply growth is set to drive some metals like zinc and copper higher into 2018.”