The current economic environment is generally supportive of commodities. Higher inflation rates, improving economic conditions and commodity supply shortages all favor this sector. As a result, investors are increasing allocations to commodities. And according to a report published by the World Gold Council, gold is positioned as the most effective commodity investment in a portfolio.
Commodities are booming. A lot of people seem to think this is a sign of pending economic growth. But in his podcast, Peter Schiff said it’s really a sign of inflation.
Most of the investment world continues to focus on the stock market and they’re not really paying attention to what going on in the commodities markets. And as Peter put it, that’s going to have a big impact on what happens in the supermarket.
Typically, a strong dollar is considered one of the greatest “enemies” of gold and precious metals prices. In fact, a relatively strong dollar has created headwinds for gold for months.
Another interesting commodity we can take a look at is oil. Historically, oil and the USD have a negatively correlated relationship, with oil being one of the most inflation-sensitive commodities out there. However, this wasn’t the case late in April. Oil surged to around $65/barrel (WTI). The price has eased a bit since, but it is still trading in the $62/barrell range.
Peter Schiff appeared on RT Boom Bust earlier this week to talk about the trade war “truce” between the US and China.
The announcement that there was some progress in resolving the trade war during the G20 summit boosted stock markets on Monday (the day this segment was aired), but that lasted all of one day. The markets tanked on Tuesday as investors realized the “truce” really didn’t mean anything substantive. In the RT interview, Peter said we really need to keep our focus on the bigger picture, particularly the Federal Reserve and the dollar.
This article was submitted by Joel Bauman, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
In this article focuses on the gold market through the lens of technical analysis. Technical analysis is a subjective form of analysis that requires a critical eye for price patterns. The goal is to use past price data to help forecast future price movement. While the focus is on gold, these observations may be extended to the silver market given their positive correlation.
Banks active in commodities have been hammered so far in 2017.
According to reporting in the Financial Times, income from commodity trading and related activities at Goldman Sachs, Citigroup, JPMorgan and nine other investment banks dropped 40% in Q1 2017, and the struggles have continued into the second quarter.