A murky picture unfolds as commodity rally stuns even bullish analysts – by Ian McGugan (Globe and Mail – July 5, 2016)


The commodity boom is back – surprising many observers and raising questions about how long the good times will persist.

Over the first six months of the year, the Bloomberg Commodity Index surged 14 per cent, well ahead of global stocks and bonds. The benchmark, which follows the prices of 22 raw materials, continued its strong performance on Monday, with silver and nickel making big advances.

Prices for several commodities are now outrunning the expectations of even bullish analysts. Last week, in response to silver’s brighter outlook, Anita Soni at Credit Suisse raised her forecast for the metal by 15 per cent, bumping it up to $19.03 (U.S.) an ounce in 2017. On Monday, silver sped past her revised estimate for next year and briefly touched $21 an ounce.

Many other analysts also found themselves overtaken by the recent outburst. “The continued surge in the silver price has already taken it close to our end-2017 forecast of $21 an ounce, which had looked very bullish,” Julian Jessop of Capital Economics wrote in a note Monday.

Compared with the dismal performance of global stocks – which combined to lose 2.5 per cent so far this year – the strength of silver has been striking. It is up 46.8 per cent since January.

Impressive results have also been posted by gold (up 27.2 per cent), zinc (33.9 per cent), nickel (13 per cent) and Brent crude (34.4 per cent). But the simultaneous gains by so many different raw materials offer mixed signals about which way the global economy is headed next.

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