Commodity Calls: Week Ending 18 October 2024

Precious metals rally as Europe cuts rates, crude oil falls on weak Chinese data, and European countries push for nuclear energy.

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? Check out this week’s Market Moves and Thematic Spotlight.

Precious Metals

Bullish

  • The Russian government has allocated US$535 million over the next three years to replenish its precious metal reserves.1 Surprisingly both gold and silver were included in the draft proposal. If Russia follows through with the plan, it will mark the first time in at least 20 years that any major central bank has held any significant reserves of silver.
  • Recent election polls have shown Trump over Harris as the betting favourite for US President.2 Gold outperformed in Trump’s prior presidency; investors could also look to hedge market volatility by allocating to the precious metal.3
  • The ECB cut interest rates for the third time this year citing a worsening economy and slowing inflation.4 Markets expect a potential fourth cut by December 2024 unless economic or inflation data turns around. Precious metals outperform when interest rates are lowered as bond yields become less competitive.

Bearish

  • US retail sales and unemployment figures painted the image of a strong economy, reducing the odds of an expedited rate-cut cycle by the Fed.5 US core retail sales grew by 0.7% MoM in September, far exceeding the 0.1% analysts had expected. Unemployment claims also came down from 260k a month prior to 241k in September.

Explore precious metals with ETPMPM.

Crude Oil

Bullish

  • Crude oil inventories in the US fell by more than expected.6 Analysts had expected an inventory build of 3.2 million barrels, but instead, they fell by 1.58 million barrels in the week ending October 11.
  • India petrochemical firms have committed US$45 billion toward boosting production, with more investments anticipated.7 India currently consumes 25-30 million tonnes of petrochemical products per year. The sector is currently valued at US$200 billion and is forecasted to grow to US$300 billion by 2025.

Bearish

  • Chinese crude oil refining, a sign of domestic demand, fell to the lowest in three months.8 Oil imports also fell 7.4% MoM amid weaker-than-expected refining activity. An IEA report also expects China’s contribution to global oil demand growth to have fallen by 70% over the past two years.9

Explore crude oil with BCOM.

Uranium

Bullish

  • According to Russian news sources, the BRICS are set to legally formalise a “Nuclear Energy Platform”.10 The platform aims to develop and implement best practices related to the use of nuclear technologies in BRICS and BRICS+ markets.
  • Member countries of the European Nuclear Alliance including France, Finland, Netherlands and Sweden, are urging the European Commission to recognise the contributions of nuclear power in Europe’s decarbonisation.11 The alliance met on October 15th in Luxemburg to make a joint statement.

Bearish

  • Investment trusts have accumulated large amounts of uranium which could flood the market in a downturn.12 The Sprott Physical Uranium Trust, for example, now holds 66.1 million pounds of yellowcake, which is theoretically enough to keep global nuclear reactors powered for upwards of six months.13

Explore uranium with ATOM.

 

Forecasts are not guaranteed and undue reliance should not be placed on them. This information is based on views held by Global X as at 21/10/2024. Investing involves risk, including the possible loss of principal. Diversification does not ensure a profit nor guarantee against a loss.

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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information is not intended to be individual or personalised investment or tax advice and should not be used for trading purposes. Please consult a financial advisor or tax professional for more information regarding your investment and/or tax situation.