2017 has not been a great year so far for commodities. Most commodities are in a consolidation phase. What does this mean for investing in commodities in 2017 and 2018? Is it time to invest in commodities or not?
According to InvestingHaven's research team, the commodities sector is in a consolidation phase and is likely to remain in its sideways trading range for the remainder of 2017. That is not consistent with Goldman Sachs which remains bullish commodities, and recommends to invest in commodities in 2017 and 2018, according to Investopedia.
Last year, precious metals and base metals did extraordinary well. Both groups fell very hard in the year(s) before, so a relief rally was certainly in the cards. Moreover, crude oil recovered last year from a catastrophic crash.
That effect is not going to take place, as most commodities, apart from some softs and grains, are pretty well recovered.
Moreover, as stock markets are likely to start a process of topping in the months ahead, it will not provide an ideal environment for commodities to surge higher.
InvestingHaven forecasts that investing in commodities in 2017 and 2018 will give moderate results, and being selective will be a key success factor.
That viewpoint is in line with Marc Faber who says about investing in commodities in 2017 and 2018 that investors "each commodity has to be looked at individually and some have rebounded and some have gone up dramatically."
The chart visualizes the point we made before. The consolidation phase started last July, after a strong rally in the first months of that year.
The market barometer shown below provides another viewpoint. Currently, the long-term trends of leading commodities are neutral. Other leading markets are also neutral, as seen below, so that does not really provide a solid ground for a raging commodities bull.
This also suggests that in 2017 and presumably 2018 choosing very specific commodities which outperform their peers will be the way to invest in the commodities space.