TD Bank expects slump in metal prices
(In order to be fare I am posting this opinion. I am bullish on zinc. Kipp)
Last Updated Tue, 11 Jul 2006 17:12:53 EDT
CBC News
Commodity prices started to fall in June, the beginning of a downward trend that will likely continue into the first quarter of 2007, the TD Bank said Tuesday.
In its latest commodity outlook, the bank economists said commodity prices fell by 5.4 per cent in June, excluding energy, the largest decline in nearly five years.
Precious metals dropped by 12.7 per cent in the month and base metals lost 9.8 per cent, while forest products fell by 2.5 per cent. The energy sub-index was flat.
Last month's slide was just the beginning of a long trend, the bank said.
"We still see scope for further adjustment over the next several months," senior economist Derek Burleton said in his commentary to the report.
"Prices for crude, base metals and, to a lesser extent, forest products appear to be most vulnerable to downward pressure in that environment," he said, adding that gold and silver are expected to gain ground.
The slump in June reverses the trends of the past five months, when the bank's commodity price index soared by nine per cent.
The TD Bank forecast differs markedly from other recent forecasts. TD Bank spokespeople were not available for comment.
Burleton expects the markets to turn up in the second quarter of 2007, "when early signs should emerge that the U.S. economy has found its footing. Then, the secular upswing in commodity prices which has been helped along by rapid growth in the developing economies should be ready for another leg."
In the meantime, Burleton expects oil prices to fall to $55 US a barrel by year-end and to $45 by mid-2007. Crude oil prices hit a record $75 in early July.
He expects base metal prices to fall by 20 to 30 per cent through the first quarter of 2007, followed by a moderate recovery later in the year.
Gold recently suffered its first losing month in a year, falling from a quarter-century high of $725 US an ounce to below $600.
However, the TD economists predict that geopolitical jitters and U.S.-dollar weakness will keep gold between $650 and $725 US an ounce over the next 18 months.
