The price of commodities saw a whipsawed market behavior throughout 2019, nevertheless, Josip Heit, who is a renowned commodity investor, thinks there are already signs of developing trends that could provide great trading opportunities in 2020.
Commodities, whether food-, metal-, or energy-related, are a vital part of everyday life. Anyone who drives a car can get significantly impacted by rising prices of crude oil. Likewise, the effects of a drought on the supply of wheat can affect your next meal’s composition.
Commodities have been proven to be a good way of diversifying a portfolio. And commodities can either be used as a long-term investment or as a good hedge against a bearish or unpredictable stock market because they typically move in the opposite direction of stocks.
Josip Heit is the chairman of the board of GSB Gold Standard Banking Corporation AG, and he has been involved in the raw material and commodity trading markets for a number of years. He is also a proponent of the gold standard. Heit claims 2020 will be a great year for those venturing into the commodity market.
In the past, the average investor would likely not devote resources to commodity trading because it requires a considerable amount of time, money, and skills. However, there are now many ways to trade commodities, some of which grant access for those who are not even experienced traders.
Predicted trend for gold and silver according to Josip Heit
2020 is starting out with presenting itself as a bullish year for most precious metals. Many precious metals are in the process of breaking out to multi-year highs. Gold prices in 2019 saw a six-year high and are poised to test even higher levels in 2020. Silver prices are beginning to percolate and are also poised to test recent highs. The demand for alternative currencies is beginning to change investors’ sentiments throughout the capital markets.
With the recent devaluation that has accompanied the USD in recent years, investors are beginning to shift their focus toward precious metals, such as gold and silver. This will likely translate into a bullish trend for gold and silver.
In the same vein, gold-linked cryptocurrencies are fast rising as a reliable means of payment. “Currently, there is an intense debate about reinstating the gold standard, and cryptocurrencies seem to be leading this campaign,” commodity investor Heit commented.
Alternative currencies, such as gold and silver, have become attractive. Both gold and silver are quoted in USD, and both precious metals have become more valuable as the dollar plunging lower.
Gold’s price usually rallies higher than silver’s and is more attuned to fluctuations in fiat currencies. According to Heit, the price of gold is likely to hit the $1,800 mark in 2020.
Crude oil prices are likely to face both headwinds and tailwinds
It is a common behavior for oil prices to fluctuate depending on the season. Oil prices rally at the beginning of summer when oil traders anticipate a high demand for oil because of the amount of driving in the summer holidays. When demand decreases in winter and fall, prices drop. Due to unpredictable fluctuations in oil prices, crude oil has become highly volatile.
One major trend to watch out for is what the Organization of the Petroleum Exporting Countries (OPEC) and its non-OPEC allies will do after March 2020, when the latest deeper cuts deal expires.
Another key trend to watch out for is how the U.S. – China trade dispute de-escalates. On December 13, 2019, oil prices reached a three-month high despite the rising hope of a phase-one trade deal. China excluded six chemicals and oil derivatives from its list of tariffed U.S. goods in the days following the announcement that a phase-one settlement had been achieved. Depending on how this turns out, it’s likely to affect oil prices in 2020.
Grains are showing signs of volatility
The weather condition has played a major role in the potential availability of the supply of grains as most of the eastern Midwest is typically flooded with heavy rainfall. While it remains unclear how much corn and soybeans will be produced in 2020, and how demand will fair, the average yield generated per acre in recent quarters is raising some concerns.
China ceased buying U.S. soybeans in 2018 because of retaliatory tariffs that rendered U.S. grains too expensive. Although U.S. President Trump made a call for China to purchase U.S. agricultural products, demand is likely to remain low until this faceoff is over.
Josip Heit is the chairman of the board of GSB Gold Standard Banking Corporation AG.