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Commodities will have “very strong” second half: Gavin Wendt

By Jean Chua
July 30, 2014

Gavin Wendt, Founding Director & Senior Resource Analyst, MineLife expects a “very strong performance” by commodities between now and the end of 2014. He told GMF today that a contrarian indicator could be the shutting of many banks’ commodities’ trading units. Here’s why:

“Many of these commodity units were established well after the resources boom had commenced and one always had the feeling that their establishment was a contrarian indicator that the good times were approaching their end (at least temporarily). And so it proved. So hopefully the exit of many of these banks from trading provides the boost the resource sector is looking for!”

The comment seems to have come at the right time, when most commodities seem to be “on the up”, he added. This is defying some of the skeptics, he said. Gold is a prime example.

“I am positive on gold despite the views of a lot of the skeptics out there. Demand remains solid, inflation is coming with respect to the U.S. economy and I still think there are fundamental reasons to have it as part of your portfolio. I think there’s solid price support around $1300 and I don’t think we’ll see significant downside from here for the remainder of 2014.”

In addition, with geopolitical concerns once again flaring in the Middle East, high prices are here to stay.

“Prices are remaining firm above $100 a barrel and I see little prospect of them declining below this level – certainly not for any significant period of time. I think the days of sub $100 oil are well and truly over. Irrespective of Middle East issues, the finding and extraction costs of oil are high these days. But the Middle East is of course playing a major role in helping influence oil prices – as it always seems to do. And shale oil in the U.S. is helping increase supply, but not really having a dampening impact on prices.”

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