[T.S.R:17559] Commodities Chastised-2011-15 Gold Average Projected At $ 850/oz, Silver at $16/oz; Collapse Inevitable-Citi

Macro

— It's hard to decide which is better: a double dip that clears the decks for a fresh start or a European economy stumbling along in the midst of sovereign risk, a US economy dragging along its deficit challenges, and a Chinese economy facing increased inflation and a West that has run out of spending power. Neither option leaves one feeling that metals will be 20% higher in a year's time. Citi's 'Global Economic Surprises' Index has plummeted and it is not surprising that cyclicals (including miners) have been retreating and cyclical equities (including mining equities) have been retreating. In 2008, equities led the commodity complex down, which raises the question of whether we will see a repeat performance. 

 

Metals

— Standing still is not an option for metals. Copper stood still for a long time before the horrors of 2008 but that 'standing still' kept mining cash flow coffers full and helped to elevate mining valuations even while the charts were signalling a horrible loss of momentum during the 'standing still' phase. As per our Macro comment, mining equity investors may have wised up to this in the current cycle and so miners are now pricing in lower metal prices. All this suggests that metal prices will struggle to push through their recent highs and our view and forecasts are that metal prices will be lower in 2012 than in 2011. 

 

Charts

— In short, the charts look horrible, whether one looks at equity markets in general, at metals or at the charts of mining equities. We examine the key charts; those of a weak disposition should look away. 

 

Metal Markets Today

— Base metal markets are generally weaker this morning on a stronger dollar and concerns that the Greek debt crisis may worsen as European governments delayed a decision on the bailout package.
 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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