Juerg Kiener, managing director and chief investment officer of Swiss Asia Capital expects to see short-term recovery in base metals. According to him, copper and aluminium may test new lows with Comex copper testing $250-260 levels.
Juerg Kiener, Managing Director and Chief Investment Officer of Swiss Asia Capital expects to see short-term recovery in base metals. According to him, copper and aluminium may test new lows with Comex copper testing at $250-260 levels.
Kiener anticipates a large imbalance in the gold market and it may see much higher levels. He believes that gold may test $1,000/oz levels next year. He further adds that gold has a strong support at $485-525/oz.
Kiener prefers precious oil and metals to base metals. He is bullish on crude. He sees crude prices at $120-180/bbl levels in the next 15-18 months.
Kiener is confident there there is no bear market in commodities.
Excerpts of CNBC-TV18's exclusive interview with Juerg Kiener:
How have you read the correction on base metals; where do you expect them to go now?
Basically, if you look at the base metal market, they had a pretty sharp sell off. I think we should see a short-term recovery but as long as the monetary conditions stay tight, interest rates move up, people de-leverage some of the positions, the risk is to test the lows again in the months to come.
How much lower do you see copper and aluminium going? Are we just seeing a technical pullback from what seems like oversold ground from the further near-term?
Basically, if we look at copper, it was at $400, then it came down to $300. It may go back up to $350 before testing the levels of around $250-260. I think that will be a great entry level for the people to look at.
The swing factors in commodities are quite normal, you see almost 30-50% corrections in the bull market before bull markets resume. So I think that after this sharp sell-off that we have seen, we need consolidation. After that, we are going to be back to make new highs in the next year.
Do you believe that the trend has turned for this market and the bull market may have peaked out for some of these base metals?
In the environment, where we are today, where Central Banks are printing money like there is no tomorrow to stabilize economies, economic conditions are basically met. With negative interest rate returns on your investments and normal financial assets being unstable, is where you get a commodity bull market.
So the commodity bull market will be shaken off from time to time as financial assets try to recoup. As long as Central Banks print money, we are going to be in a safe environment, we will be multiplying balance if we see the commodity bull market continuing.
Where do you stand on Gold?
It is basically real assets versus financial assets. We have seen Central Banks' intervention to bring the gold market prices down last month. I think that Central Bank intervention will not last very long and we are going to see much higher levels in the years to come.
So price movements, where prices are dropping 15-20% is a great time to
What is your sense of where the bottom could lie in gold. Would you think it could go as low as 500?
The first level we tested was the $540-550 level, the major support lies between $485-525, which is a very strong support, and on that level, I would be an aggressive buyer of gold.
On a relative basis what would you bag; some of these base metals or gold and silver?
To be honest, I will rather stay on the precious metal side because it is absolutely opposite to Central Banks, which have made absolute havoc printing money. So, base metals and oil might still do fine but I prefer to be on the opposite side of money. We have got a problem with the financial system, credit, credit margins and credit risk. So, if I am looking for investment, I am looking for something, which is the beneficiary of all these problems. So, precious metals are the key drivers basically.
Does it surprise you that crude has not corrected meaningfully even as most other commodities have corrected?
I would still expect the correction to occur there as well. But the situation there is more political. The political environment, which we have in Middle East, has control of 25% of the global output, which has been consumed. Even that environment could stay high as there is basically no settlement coming through Iran. So on the long-term, we are very bullish on oil. I think the risk return on it is relatively good. I think that you haven't got much more risk at $62. If it chops another $5-7, then that will double the position.
On the upside, where do you see it going up to by the end of this year?
For the year-end, it is relatively difficult to comment but sometime over next 15-18 months, oil should reach basically triple digit numbers, somewhere between $120-180 is possible.
Globally, oil consumption is going to grow and the supply side is tight. We only need something to go wrong in the Middle East and the prices will be significantly higher. So I think that the bets are good to stay longer.
You see this as just a big correction in the overall commodity multi-year bull run or there is no reason for you to believe that there is any bear market in commodities yet?
I do not think we have bear market in commodities as the commodity market is only about three-four years old and normally that lasts about 15 years. So I do not think we have excesses.
We have to see no capital expenditure in that area so there is no news supply coming on stream neither. As commodities in emerging markets have been the only source for hedge funds to achieve returns for the last couple of years, any danger to their position means they would be de-leveraged. This could mean quite nasty corrections, as one might have seen in Indian markets.
We might see the same in precious metals and in commodities as well. So it is hedge funds deleveraging, which can result in sharper pull backs.
For more on markets & business, log on to www.moneycontrol.com.
