THE Australian eastern market indicator is now comfortably above this year's low of 722 cents a kilogram set in February, but market commentators remain nervous that the current wool price rally is not matched by historic economic fundamentals.
At early sales in Melbourne and Sydney, prices for Merino wools were steady to a little higher in the broader micron categories despite the Australian dollar trading at close to US77 cents.
Commodity analyst Malcolm Bartholomaeus, Callum Downs, said the wool market was showing all the signs of a strong rally which could add more than 300 cents a kilogram to the market indicator over the next 15 months.
But, it all could end dangerously in a "big slide".
"At the moment we look to be 100 cents into a 250-500 cent rally which would peak around August next year if this rally is similar to previous price cycle," Mr Bartholomaeus told producers on a webinar session last week.
Mr Bartholomaeus said there were three market scenarios: a textbook market rally towards a peak late next year; short supply could cause market to spike at a high level; or the current economic crisis could bite wool consumers and the current price rally could fizzle out.
"Do not assume that the current rally will last," he said.
"I think you should be selling wool as it becomes available for market, but I would not be advocating forward selling just yet.
"If there is a spike later in the year, or the rally peak in mid 2101 you can take advantage and lock in the gains."
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