Commodity prices – doing it tough!
According to the commerce department, US Gross Domestic Product rose at a revised 1.8 per cent annualised in the March 2013 Quarter, down from the previous estimate of 2.4 per cent. Excluding inventories, GDP grew at an annual pace of 1.2 per cent.
Combined with the perceived pressure from the growth in the credit to GDP ratio in China (click here for our blog on 27 June 2013) – double the rate of GDP growth over the past four years – it is difficult to paint a bullish picture for commodity prices in the foreseeable future.
Calendar year to date has seen the following declines in various commodity prices: Silver -38%, Gold -25%, Iron-ore -20%, Copper -16%, Aluminium -15%, Wheat -14%, Lead -12%, and Zinc -11%.
Thankfully, the Australian Dollar has depreciated 11%, in sympathy, from US$1.04 to US$0.93. Oil is one of the few commodities that is up so far in 2013 – by 4% to US$95.50/bbl.
Despite the apparent “value” available within the Australian resource and resource service sector, Montgomery remains wary.
At present, we prefer to focus our attention on high quality industrial businesses that have a strong idea of the prices they will be receiving for their goods or services.
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
