Commodity Calls: Week Ending 27 September 2024

Copper bounces on Chinese Policy Blitz, gold hits all-time high on Fed cut expectations, and uranium receives support from major global banks.

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Copper

Bullish

  • Copper was a strong performer last week after China announced a slew of new policies intended to improve economic growth and prop up the local real estate market. The metal crossed US$10,000 per tonne for the first time since June.1
  • The Bureau of Economic Analysis (BEA) reported the US grew more than previously expected in the five years to 2023, helping buoy sentiment around the country’s current economy. According to the bureau’s annual update, the US economy outperformed estimates by US$292.2 billion since 2018 – the BEA also says the US GDP likely grew by 3% in Q2 2024.2

Bearish

  • Despite a strong market rally, Chinese factory activity contracted for its fifth month in a row.3 The country’s official manufacturing PMI came in at 49.8 for the month of September, below the 50-mark which separates growth from decline.

Explore copper with WIRE.

Gold

Bullish

  • Gold reached a record high of US$2685 per ounce last week as US economic data continued to provide support for the Fed’s ongoing easing cycle.4 US consumer sentiment came in lower than expected in September, while core PCE data showed inflation had slowed.5
  • Market pricing suggests the Fed may cut rates by another 75 bps by the end of 2024.6 Gold has historically had a negative relationship with US interest rates, as such investors may expect the metal to head higher.

Bearish

  • Asian central banks have slowed their purchasing of gold. The People’s Bank of China, in particular, has held back on adding gold to its reserves for the fourth month in a row.7 Prior to the pause, the PBOC had accumulated gold for 18 months in a row and was the single largest purchaser of gold in 2023.8

Explore physical gold with GOLD.

Uranium

Bullish

  • A group of 14 major global banks have expressed support for the COP28 call to triple global nuclear power capacity by 2050.9 The list of institutions include: Bank of America, Barclays, BNP Paribas, Brookfield Asset Management, Citi Bank, Goldman Sachs, Morgan Stanley, Societe Generale and more.
  • Canada is experiencing a surge in nuclear jobs. A report released by the Canadian Nuclear Association and Organisation of Canadian Nuclear Industries showed that the country’s nuclear-related workforce expanded by 17% since 2019 and with new nuclear projects arising job growth in the industry is expected to accelerate.

Bearish

  • According to the EIA, US uranium production came to 180,242 pounds in the first half of 2024, more than four times the country’s total production for 2023 and close to 2022’s full year production of 193,945 pounds.10
  • The US government is concerned uranium purchasers may be circumnavigating its ban on Russian uranium by importing from China.11 The US Department of Energy is now “closely tracking imports from China” to ensure the Russian ban will be enforced. While shipments of enriched uranium from China remain small, the new flow of imports are significant because China did not send any uranium to the US between 2020 to 2022.

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 30/09/2024. 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.