The method of our forecast is based on 3 analytical tools:
- Business Cycle Analysis
- Technical Analysis
- Fundamental Analysis
Kairos Commodities skillfully combines a series of analytical tools to add strength and robustness to our forecasts. These analyses are tied together through a regression that studies whether the current price level reflects the fundamental market factors. These tools include:
Business Cycle Analysis
Business Cycle Analysis analyzes fluctuations in the global economic activity. These fluctuations occur around a long-term trend (macro economical trend), and typically involve shifts over time between periods of relatively rapid economic growth and periods of relative stagnation or decline.
The increase or decrease in economic activity has a direct impact on raw material markets, and their supply & demand situation, and is essential for the long-term picture of the price trends.
Almost all commodities are affected by movements in the global economy - so being aware of the movements in the global economy is a necessity to understand where a commodity’s price is moving.
In a market economy, price is determined by the interaction of supply and demand. The study of supply and demand is also known as the study of fundamentals or "fundamental analysis".
However, supply and demand is not enough. That is only half the equation. A complete fundamental analysis requires a study of various factors that affect price. Kairos Commodities' fundamental analyses includes a study of supply, demand, inventory and cost drivers for each specific commodity, including an overview of volatility, speculation and price seasonality.
Fundamental analysis provides the basic information and insight that is needed for any commodity manager to understand what drives the price for a specific commodity.
This refers to the discipline of forecasting the future direction of prices through mathematical indicators and other tools. The right combination of these tools can both give long-term forecasts, but also pinpoint the exact start of a new price trend.
Technical Analysis identifies changes in price trends and it furthermore serves as a “warning system” that puts you in front of any price movements/corrections.
The theory supporting technical analysis suggests that all marketplace information about a commodity is reflected in its price. The price of a commodity reflects facts as well as the expectations and beliefs of all market participants. A technical analysis will provide the needed timing for procurement to make long term or short-term contracts.
The analytical models have guided us through many difficult negotiations
" Kairos Commodities help us in the daily operations by giving us a quick overview of volatile markets. The analytical models that Kairos Commodities make use of, in particular the Price expectations, have guided us through many difficult negotiations. When we base our negotiations with suppliers on solid data that forecast a price decline, it is easier to convince our suppliers to lower the price. "
- Lars Igler, Head of Procurement, Kühlmann GmbHWhat our clients say