Worldwide Financial sun Worldwide (commodities Set To Correct)
Sun Worldwide analysts say that there is a distinct likelihood of corrections in
the commodities complex as the global economy shows stronger signs of responding to the unprecedented measures taken by governments to combat the slowdown.
The general consensus is that central banks around the world will begin tightening monetary policies to rein in the massive liquidity that has been pumped into developed and developing economies in order to stave off the threat of inflation.
Sun Worldwide explained to clients that, of the countries that will inevitably tighten policy, China is considered to be the one which will have the most profound effect on the price of commodities given its almost insatiable appetite for raw materials including copper and iron.
Although these materials are still in high demand in China, recent policy decisions from the Peoples Bank of China aimed at cooling potential asset bubbles in real estate and consumer credit may filter down to the countrys current partiality to the acquisition of resources companies and, by extension, the commodities they produce.
Despite this, Sun Worldwide suggests that the price of oil is unlikely to fall too far given recent signs that the US economy is returning to some semblance of sustainable growth. The analysts believe that the oil price is reflective of the demand in the emerging markets but this will inevitably rise again once US growth begins to accelerate.
The firm does not advise clients to reduce their holdings in precious metals but merely suggests that they should be mindful of the potential for short-term corrections in prices.