Commodity Calls: Week Ending 22 March 2024

Australian rare earth miners get US backing, Congo overtakes Peru in copper output, and gold hits all-time highs as Fed confirms rate cuts.

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.

Transition Metals

Bullish

  • The US is backing two Australian rare earth metal miners with up to US$850 million in funding.1 China currently dominates the rare earth mining industry – western countries are investing to build new supply chains and reduce reliance on Chinese exports.
  • The US Department of Energy will grant US$475 million in funding to five clean energy projects in Arizona, Kentucky, Nevada, Pennsylvania, and West Virginia.2 The plan includes repurposing almost 2700 acres of former coal mining land to support solar projects as well as other clean energy plants.3
  • The French government has set the final deadline for a deal with New Caledonia designed to salvage the region’s troubled nickel industry.4 Under the proposed deal, France would subsidise energy prices alongside local authorities for up to €200 million a year, as well as invest in electricity production specifically for nickel plants.

Bearish

  • Nickel prices fell after Indonesia announced it will accelerate the approval process for a production quota of 152 million tonnes for nickel.5 Indonesia requires all miners to secure quotas prior to production – the lack of approvals by the resource rich nation has been a driver of nickel prices so-far this year.6

Explore metals critical to the energy transition with GMTL.

Copper

Bullish

  • The Democratic Republic of Congo has overtaken Peru as the world’s second largest copper producer in 2023.7 Congo’s copper output totalled 2.84 million tonnes last year, just higher than Peru’s output of 2.76 Million tonnes.8 Congo has grown its copper mining capacity significantly in recent years as investors have pivoted away from Peru due to its recent political turmoil.
  • Copper prices hit an 11-month high last week after the Federal reserve signalled the number of expected rate-cuts had not decreased despite sticky inflation.9 The metal has rallied roughly 10% over the past six weeks, driven by positive global economic outlook and supply risks.10

Bearish

  • Copper stockpiles at the Shanghai Futures Exchange (SHFE) have shot up to more than 285,000 tonnes after sitting at roughly 40,000 tonnes at the end of December 2023.11 Metal stockpiles at the SHFE do tend to increase at the beginning of each year, however copper’s sharp buildup this year left inventories at the highest level since 2020.

Explore copper with WIRE.

Gold

Bullish

  • Gold surged to an all-time high of ~US$2220 last week after the FOMC suggested it is not concerned with sticky inflation and three rate-cuts are scheduled to come in 2024.12
  • Funds under SPDR Gold Shares, the world’s largest physical gold ETF (US listed), rose for four days in a row last week – it’s longest winning streak in two years.13 This is a new development for gold’s price movements this year which have been mostly driven by central bank purchases, not retail investment.

Bearish

  • The US dollar strengthened after the Federal Reserve upwardly revised growth GDP growth forecasts for 2024. US GDP is now expected to grow by 2.1%, up from 1.4% projected in December.14 Gold price is pressured by US dollar strength.

Explore physical gold with GOLD.

 

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 26/03/2024. Investing involves risk, including the possible loss of principal. Diversification does not ensure a profit nor guarantee against a loss.