Scalper1 News
Gold and oil were the two most-talked-about commodities last year thanks to their awful performances. These two widely-followed commodities witnessed dire trading in 2014 with the latter being thrashed heavily by the strength of the greenback, demand-supply imbalances, and cooling geo-political tension in the second half of the year. While muted global inflation, reduced demand from key consuming nations like China and India restricted the yellow metal’s northward ride, the return of worries in the Euro zone, and poor data points from Japan and China have made oil more diluted. As a result, oil prices plummeted more than 50% in 2014 and gold registered the first consecutive annual decline last year since 2000 . Some are also worried that the slump could continue as the Fed is now on its way to hike the key rate this year. The Fed’s step strengthened the dollar and in turn marred commodity investing. Great Start to New Year for Gold Having lost more than 8% in the last six months, SPDR Gold Trust ETF (NYSEARCA: GLD ) bounced back to start the New Year gaining about 2% in the last two trading sessions as of (January 5, 2014). So, did the biggest gold mining fund, Market Vectors Gold Miners ETF (NYSEARCA: GDX ) , which has added about 5.8% during the same phase. Gold miners – which often trade as leveraged plays on gold – delivered two successive years of negative performances losing about 50% in 2013 and 16% in 2014. A sagging stock market and worries over Greece political crisis indicating the nation’s likely way out of the Euro area bolstered the safe-haven appeal of gold to start this year. As a result, gold bullion crossed the $1,200/ounce mark after a few months. In such a situation, investors might want to know the upcoming course of gold related ETFs. We do not expect the latest uptrend to last long. Most of the macroeconomic indicators that went against gold prices last year like the Fed policy, strong U.S. dollar and deflationary spell, will nothing but intensify this year. GLD is trading a little below its 200-day simple moving average but higher than 50 and 9-day simple moving averages which signify long-term bearishness for the ETF. The biggest fund in the space, GLD, is yet to enter the oversold territory as depicted from the above chart. The ETF is trading at a Relative Strength Index (RSI) value of 53.48 indicating there is room for further erosion in the price once the risk-off sentiments drop out of sight. The trend was similar for GDX too with current price trading below long-term averages and above the short-and-medium term averages. Its RSI value stands at 56.54. In a nutshell, miners will likely follow the underlying metal’s direction, obviously with higher magnitude, this year. Overall, the gold mining space will likely see a mixed 2015 and will be busy paring down losses incurred last year. Investors interested to bet on gold should follow the space closely as it is expected to be on a roller coaster ride this year. No New Year Party for Oil Unlike gold, there was no celebration for oil this New Year. WTI crude prices are now below $50, marking a massive slide from their level a year ago. Needless to say, this was a new multi-year low. Persistent supply glut, no production cut by OPEC as well as the U.S. will keep the space under pressure. United States Oil Fund ( USO ) is trading a little below long, medium and short-term moving averages which signifies utter bearishness for the product. In fact, it seems as though oil does not have any driver which can revive it in the near term. However, the product is presently trading at a RSI value of 22.53 indicating that it slipped into oversold territory and might change its course soon after hitting a bottom. Per barrons.com , Citigroup’s commodity group cautioned about a frustrating 2015 for oil and slashed its oil-price forecast for this year and the next to even lower than its most bearish prior estimates. Citi cuts price expectation for WTI crude from $72/barrel to $55 in 2015 while Brent oil price expectation has been reduced to $63 a barrel from $80 a barrel. Bottom Line In short, 2015 should not be great for both commodities and the related ETFs barring some occasional spikes which can be defined as a correction. Investors dying to look for a sustained trend reversal in these commodities, should wait for a big Chinese and Euro zone stimulus, which may bolster the regions’ waning manufacturing industry spurring the usage of oil and goading investors to buy more gold (notably, China is the world’s largest consumer of the yellow metal). Investors should also look out for a pull back in oil production and the return of geo-political tensions. As far as the Fed rate hike is concerned, we believe that the most of it has been priced in at the current level, suggesting that either way, it will be another interesting year for oil and gold. Scalper1 News
Scalper1 News