Commodity Calls: Week Ending 16 August 2024

Work resumes after strike at the world’s largest copper mine, money managers are most bullish on gold since 2020, and the US looks to refill its strategic petroleum reserves.

Join Global X each week for ‘Commodity Calls’ to explore all the recent signals and developments that occurred in the world of commodities.

Looking for more ETF Express? Check out this week’s Market Moves and Thematic Spotlight.

Copper

Bullish

  • Positive US economic data reinforced the likelihood of a soft-landing scenario, encouraging risk-on bets on copper.1 US CPI came in cooler than expected, rising 2.9% YoY against expectations of 3.0%. Retail sales were also better than expected, up 1% MoM – analysts forecasted just 0.4%.

Bearish

  • BHP Group and union leaders in Chile have reached a wage agreement, ending a strike at the world’s largest copper mine, Escondida.2 Escondida produces 1 million metric tonnes of copper a year, roughly 5% of global copper supply.3 The strike lasted three days in total, spanning Tuesday to Friday last week.

Explore copper with WIRE.

Gold

Bullish

  • Net money manager futures positions for gold hit a four-year high, indicating speculators are bullish on the precious metal as the Fed looks to start its rate cutting cycle in September.4 Traders will be keeping a keen eye on the Jackson Hole Symposium this week as a key indicator for the Fed’s preferred interest rate path.
  • USD gold hit a new all-time high of ~US$2510 as traders relished softer US inflation data.5 The positive reading has all but locked-in a rate cut at the Fed’s September meeting. Precious metals become more attractive to investors in low interest rate environments as they are non-yielding assets.

Bearish

  • Technical analysis on gold/USD indicates gold has hit the top of a channel it has been tracking since April, further upside may rely on a larger catalyst.6

Explore physical gold with GOLD.

Crude Oil

Bullish

  • Crude oil prices climbed as optimism returned that the US economy could be heading for a soft-landing. Positive US economic data has helped buoy sentiment around oil’s near-term demand outlook.
  • The US is set to refill its Strategic Petroleum Reserve (SPR) over a period extending into 2025. Specifically, the US Department of energy has stated that its goal is to purchase crude oil when prices are at or below US$79 per barrel.7 The replenishment strategy comes as the SPR has notably released more than 180 million barrels of oil since 2021 to help ease high gasoline prices.8 The SPR currently houses 375 million barrels of crude but is capable of storing as many as 714 million barrels.

Bearish

  • Crude oil refineries in China produced 6.1% less fuel in July than the year prior, marking a fourth consecutive month of output declines.9 The daily processing rate stood at just 13.91 million barrels, which is the lowest since October 2022.

Explore crude oil with BCOM.