Commodities witnessed an interesting end to a decade in 2020, which was for the most part unfriendly for the resources sector. Investors brace for a new commodity super-cycle in 2021 as global economic recovery and reflation trades are set to play out strong. Industrial metals such as silver and copper are likely to outshine gold and oil prices, FXStreet’s Dhwani Mehta reports.
See – Gold Price Analysis: XAU/USD to gun towards $2,000 over 2021 – TDS
Key quotes
“The year 2021 is likely to see an extension to the structural shift in commodities, driven by two main narratives; China’s quick post-pandemic economic turnaround and the global reflation play. Reflation theory refers to an expansion in the level of economic output by fiscal or monetary support offered by governments.”
“Silver has wider applications in the industrial sector as it is also seen as the next best hedge against inflation after gold. Therefore, if a potential vaccine, as well as stimulus-driven global economic recovery, materializes, the white metal could see a strong revival in demand for industrial applications.”
“Gold prices are likely to remain supported by the continuance of massive fiscal and monetary stimulus globally and higher inflation prospects. However, the extent of the rise may not match that seen in 2020, as governments could hold back on rolling out additional stimulus should the vaccine-driven economic turnaround gain momentum.”
“An unprecedented move towards copper-intensive renewable electricity wind power generation projects by the US and the dragon nation has bolstered the demand for copper. [...] A rally towards the $10K level cannot be ruled out on an acceptance above $8000.”
“Oil prices are likely to see an evenly balanced 2021, with the first half coming in as a struggle for the buyers to sustain the recovery. With travel, tourism and hospitality likely to take a few years to return to pre-pandemic normality, the room for additional upside in oil remains limited. Even so, the vaccine-driven optimism about an economic recovery and stimulus measures could likely keep a floor under the prices.”
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