Beware 2016 Forecasts: Most Got 2015 Wrong

Tumbling Commodities

This year’s rout in commodities surprised all but the most bearish of forecasters as tepid global inflation dimmed the allure of precious metals, weak Chinese demand hurt raw- materials prices and a global supply glut sent crude oil tumbling. The Bloomberg Commodity Index sank 26 percent, on course for its worst year since the global financial crisis in 2008.

Spot gold prices, down 9.1 percent this year, will probably drop a further 12 percent to $950 an ounce by the end of 2016 as rising U.S. interest rates reduce the metal’s appeal as an alternative investment, according to Oversea-Chinese Banking Corp.’s Barnabas Gan, the most-accurate precious metals forecaster tracked by Bloomberg in the past three quarters. That compares with the median estimate of $1,100.

Dollar Dominance

In the $5.3-trillion-a-day currency market, many consensus trades panned out this year because analysts correctly forecast the dollar’s 2015 ascent. The U.S. currency, as measured by the Bloomberg Dollar Spot Index, has gained 9 percent as traders positioned for a policy divergence between the Fed and its central-bank counterparts in Europe and Japan. Enrique Diaz- Alvarez of Ebury Partners Ltd., one of the few forecasters to predict that the dollar’s rally would take it beyond $1.10 per euro, now says the currency will reach 95 cents by 2017. It traded at $1.0918 on Tuesday.

One of this year’s biggest currency surprises came from China, where the yuan weakened 4.2 percent against the dollar after Chinese authorities devalued the currency in August and shifted to a more market-oriented exchange rate as part of a successful bid for inclusion in the IMF’s basket of reserve currencies.

Michael Every, the most bearish yuan forecaster tracked by Bloomberg at the end of 2014, sees another 16 percent drop next year to about 7.7 per greenback as the biggest emerging economy slows and authorities guide the yuan using a basket of currencies rather than just the dollar. His forecast compares with the median estimate of 6.6.

“They want a stable currency, but not just against the dollar,” said Every, the head of financial-markets research at Rabobank Group in Hong Kong. “The yuan is too expensive.”