Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Wednesday, 4 November 2015

No respite for commodity prices...

Crash continues for commodities

No respite indeed in October as the RBA's Index of Commodity Prices fell by a further 1.1 per cent in SDR terms (on a monthly average basis) to be 19.8 per cent lower over the past year. 

The bulk commodities of iron ore and coal saw their respective prices decline yet again, and this was only partly offset by an uptick in the gold price.

In Aussie dollar terms the fallout has been slightly less dramatic, the index being down 7.4 per cent over the year.

Had spot prices instead of preliminary estimates been used the result would be even less impressive in October. 

With iron ore and coal accounting for more than 55 per cent of the RBA's index weights - and there being little prospect of material improvement for either commodity in the near future - any hopes for a rebound must be pinned on gold, oil and LNG...and possibly copper, if China offers stimulus.

Despite rising export volumes, the economy will notch up its 18th consecutive trade deficit this morning, so stay tuned for that.

In August another $3 billion trade deficit was racked up as I analysed here, the retracement in the month in part related to a reversal of a surge in gold exports in the preceding month (aka. noise).

With export volumes of coal and iron ore approximately flat in the month of August, and price movements also relatively moderate in that month, the market expects to see a similar trade deficit this time around, although the forecast range is as usual wide.