Time To Take Out A ‘Shopping List’ For Commodities
BY SARAH BENALI (Published on KITCO News on AUGUST 18, 2015)
As markets await the release of the minutes for the July Federal Open Market Committee (FOMC) meeting for clues as to when the central bank will raise rates, one options expert says he doesn’t see the Fed pulling the trigger just yet, and it may be time for investors to start looking at commodities again.
“If [the Fed] is keen on [inflation], it’s really difficult to see how they’re going to raise interest rates in the face of commodity prices in freefall,” James Cordier, founder and president of Optionsellers.com, told Kitco News in a phone interview Tuesday.
Commodity prices have taken a hit so far this summer, with indices hitting multi-year lows in last month. Bloomberg’s commodity price index hit a 13-year low in July, with oil prices leading the pack, falling roughly 25% since July 1.
“I would say commodities are at a 13-year low, there’s no end in sight. It’s bearish… [But] that’s when you start looking,” he said, adding that this is the time for investors to start getting out a commodities ‘shopping list.’
Looking at gold, Cordier said that although the market continues to be bearish, he is seeing interest from investors because the Fed may not be moving as quickly on rate hikes as originally expected.
The president of the investment firm said he does not know exactly where the bottom for gold is, however, he expects prices to remain above $850 an ounce, and probably even hold $1,000 an ounce. He explained that his firm aims at selling options, and for the next six to nine months, he aims to offer $800 to $850 puts for investors.
“We’re very optimistic gold is going to stay above $850 and when you sell 850 puts, that’s the bet that you’re making,” he explained.
“Gold is approaching…its production level,” Cordier said, adding that it is around the $1,070-1,080 level. “At that point, gold is getting near its low.”
Cordier explained that interest rates being near zero around the world and cheap oil prices should be strong catalysts for a global economic rebound, and yet markets continue to struggle, that is why gold is seeing support.
Although gold prices remain range-bound, trading roughly between $1070 – 1130 in the last month, Cordier said these levels should be attractive to longer-term investors.
“If you’re looking at several months out — or a year or two — I think you’d be nibbling at these levels. I think you’d be looking to buy.”
December gold futures were last down $2,40 (-0.21%) at $1,116.00 an ounce as of 1:45pm EDT.