Iron Ore prices have been declining and Jonathan Barratt, the Chief Investment Officer at Ayers Alliance Securities, said in a recent intervention on CNBC that this commodity might be going through a “destocking stage.” and any “rally will be sold.” This decline might be caused by the excess in the production of Iron Ore, for example, Mr. Barratt pointed out that Australian Iron Ore mines are delivering record outputs of the metal.
At the same time, the decline in iron ore prices might affect the stock price of companies engaged in its production. As Mr. Barratt pointed out, the lower is the price for iron ore, the lower is the margin set by these companies, and in this way, they are under more pressure with the decline of the commodity prices.
Australian stocks engaged in iron ore production such as Atlas Iron Limited (ASX:AGO) or Fortescue Metals Group Limited (ASX:FMG) are declining, these two stocks already loosing around 40% and 20% since the beginning of the year respectively. Mr. Barratt states that iron ore producers are delivering high outputs while they still can attract buyers, but it might be in their detriment that they do that, because, apparently, there are too many suppliers.
Gold is another commodity that has lost around 10% over the past year. However, the price for gold has gained some ground this week on the back of an European Central Bank meeting and a nonfarm payroll report. “Gold has no friends at the moment. Hopefully it will get some support around this 1240 level,” Mr. Barratt said. At the same time, the CIO of Ayers Alliance Securities considers that gold prices are controlled more by other precious metals, such as platinum and palladium, rather than the ECB and the nonfarm payrolls. A big impact will also come from the situations in South Africa and Russia, which are two of the largest producers of platinum and palladium.
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