Commodity Forecast Based on Self-Learning Algorithm

This article was written by David Shabotinsky, a Financial Analyst at I Know First, and enrolled at the undergraduate Finance program at the Interdisciplinary Center, Herzliya.


Commodity Forecast

Over the past year, the commodity market had a strong recovery in an overall volatile market that exceeded investor expectations. I Know First’s self-learning algorithm predicts over 3000 assets in various financial markets, including commodities. Below, highlight the most popular commodities forecasted by the algorithm and their respective one-year returns. Our 2017 commodity forecasts can be found here, and are compared to Baron’s commodity outlook as well.

Commodity Forecast

Coal, as tracked by KOL, had seen a huge recovery in the market following higher than expected global consumption across the globe. Though many had thought the industry was going bankrupt in the beginning of 2016, it had quickly reversed and was our top performing commodity for 2016. On November 12, 2015, I Know First’s self-learning algorithm had predicted a rise in prices of coal as a tradable good. In 1 year, coal prices rose by almost 138%. Using deep learning the algorithm was able to forecast the turnaround in the coal industry when many investors thought the industry would go bankrupt. One of the key market players, Cloud Peak Energy Inc. (CLD), had as well a huge recovery, which the algorithm predicted as well. The algorithm was able to forecast a short term bullish prediction of CLD, which gained 37.44% in 14 days. Coal was our largest commodity gain for the past year.

Oil, as represented by natural gas (NG1) and brent crude oil (B1), had a volatile past year which has in general been in on a downward trend until the recent OPEC deal breakthrough. Saudi Arabia and Kuwait are two major oil suppliers which have both announced major supply cuts. I Know First had predicted a bullish outlook on both commodities in the beginning of 2016. On September 30th, 2016, I Know First continued to predict both NG1 and B1 in a bullish manner, and have risen 28.14% and 15.25%, respectively.


Copper prices have had a major recovery as well over 2016, with major firms such as Freeport McMoran (FCX) experiencing a major share price recovery, in a positive correlation with copper prices. On December 1st, 2016, an I Know First analyst explained the past price appreciation of FCX shares, and what the future holds for the firm during a Trump presidency. Additionally, I Know First’s AI-based algorithm had a 3-month bullish prediction copper prices on September 28th, 2016. In 3 months, prices rose by 16.22%, through future/forward contracts, as a result of higher than expected global consumption.

Both silver and gold prices had a volatile year but overall rose throughout 2017. In the beginning of 2016, investors had dramatically sought safe havens to protect against market uncertainty such as Brexit and the U.S. elections. I Know First’s algorithmic predictions successfully forecasted the rise in both prices of gold and silver. On May 20th, 2016, the algorithm had a 3-month bullish prediction. In 3 months, silver and gold rose 17.10% and 6.76%, respectively. Though most of wall street forecasts expectations for gold and silver, most predicted a price drop in gold and were wrong. Investors had not expected the political uncertainty to continue in the EU and Eurozone as well as Brexit to be voted in. On October 11th, 2016, an I Know First analyst wrote a gold forecast for the upcoming year in accordance with I Know First’s algorithmic prediction. XAU rose by 5.02% since the algorithmic prediction.

During the past year, coffee prices rose as a result of a supply shock in the main coffee producing nations, Brazil and Vietnam. Poor weather conditions greatly hurt farmer output of coffee beans, which are extremely sensitive to a proper growing environment. On October 30th, 2016, an I Know First analyst wrote an industry analysis on coffee and the direction it is heading as a result of the supply shock.


Comments are closed.