Commodity Market Review: Coffee, Palladium, and Gold Look Golden
Summary: Coffee, Palladium, and Gold Commodity Review
- Fears of frost in Brazil combined with an appreciating Brazilian Real have increased the cost of coffee.
- Global economic and political tension along with expectations of interest rate cuts have increased the price of precious metals.
Coffee
Brazil is the world’s largest producer of coffee beans. The state of Parana, where coffee production totals one million bags, is currently undergoing a frost scare. Fears of potential frost damage have increased demand for coffee because traders fear a coming decrease in supply.
Moreover, the recent appreciation of the Brazilian Real has affected the value of coffee in USD. As the Brazilian Real Strengthens, coffee prices in the US increase because the US imports coffee from Brazil. In the last two weeks, the Brazilian Real appreciated against the US dollar with USD/BRL decreasing 1.11%.
Thus, due to both fears of frost in Brazil and a strengthening Brazilian Real, ICE_KC1 (coffee) rose 7.01% over the past week, in line with I Know First’s bullish outlook.
The charts above illustrate that the price of coffee futures increases as the USD/BRL ratio decreases, which occurs when the BRL appreciates.
Palladium
Palladium is used in catalytic converters that reduce pollutants in car fumes. Recent attempts to clean up air pollution have helped propel palladium’s growth. Palladium prices are also increasing due to a shortage of supply – according to the U.S. Geological Survey, 7% less of the metal was mined this year than the year before, and demand has already outstripped supply for years.
In January, palladium became the most expensive precious metal for the first time since 2002, and its price in 2019 has grown 30% compared to an 11% increase in gold.
Moreover, because palladium is a precious metal, expectations of Federal Reserve interest rate cuts have increased the growth of palladium because lower interest rates decrease the opportunity cost of holding commodities, which carries no yield. However, it is important to note that a better than expected U.S. job report may reduce the likelihood of interest rate cuts. Overall, PALL rose over the one week period of the forecast by 3.26%. I Know First was correct in forecasting a positive future for the palladium commodity.
Gold
Gold is a safe haven asset, or one that retains its value in times of turbulence. Global economic uncertainty like the US – China trade war and Iran exceeding the limits of the nuclear deal has pushed investors to turn towards safe haven assets like gold.
Furthermore, while the U.S. job report was better than expected, prior expectations of Federal Reserve rate cuts increased the growth of gold. Like with palladium, expectations of lower rates decrease the opportunity cost of holding gold because it has no yield.
Over the past 14 days, from June 20th, 2019 to July 4th, 2019 gold grew by 6.87%. Thus, I Know First correctly selected GDX as a commodity with a bullish future.
I Know First Forecast Performance
On June 27th, 2019 the I Know First algorithm issued bullish predictions for commodities for a 7 day time horizon. The predictions included ICE_KC1 (coffee futures), and PALL (palladium) with a positive signal of 1.68 for ICE_KC1 and 1.31 for PALL, and with a predictability indicator of 0.14 for ICE_KC1 and .15 for PALL. Over the 7 day trading period from 27th June to 4th July, ICE_KC1 gained 7.01% and PALL rose by 3.26%, in good agreement with the I Know First forecast. This bullish commodities forecast was sent to the current I Know First subscribers on 27th June, 2019.
On June 20th, 2019 the I Know First algorithm issued bullish predictions for commodities for a 14 day time horizon. GDX (gold) had a positive signal of 2.14 and a predictability indicator of 0.34. Over the 14 day trading period from 20th June to 4th July, gold gained 6.88%, in good agreement with the I Know First forecast. This bullish commodity forecast was sent to the current I Know First subscribers on 20th June, 2019.
Algorithmic Stock Forecast: This is a Coffee, Palladium, and Gold Commodity Review. The table is a commodities forecast produced by I Know First’s algorithm. Each day, subscribers receive forecasts for six different time horizons. Note that the top 10 commodities in the 1-month forecast may be different than those in the 1-year forecast. In the included table, only the relevant commodities have been included. The boxes are arranged according to their respective signal and predictability values (see the link for detailed definitions). A green box represents a positive forecast, suggesting a long position, while a red represents a negative forecast, suggesting a short position
Please note – for trading decisions, use the most recent forecast.Get today’s forecast and top commodities picks.
