Commodities Monthly Roundup ~ June 7th

May remained supportive of commodities as the global recovery continued apace. USD weakness helped support commodity prices as the FED continued to ignore inflation which hit 4.2% YoY. US manufacturers have been flooded with new orders for a wide variety of goods including vehicles and are struggling to keep up amid widespread labour and supply shortages. US 10-year Treasury yields rose to a 2 -week high on the back of this demand and firmer oil prices.

Energy

Oil prices touched multi-year highs above $70 a barrel as OPEC+ forecast higher demand and boosted output. Demand normalisation together with climate activism could push oil prices even higher in the short term. Ironically demands for Big Oil to drastically cut emissions and shift investment to low-carbon energy instead of oil and gas is adding to a historic underinvestment in fossil fuels infrastructure and exploration. Currently 80% of global energy is met by fossil fuels and any significant change will take decades to achieve. Goldman Sachs is still targeting $80 per barrel at some stage this year, this despite moves by Biden’s administration to lift sanctions on Iran, a move which could see an additional 2.5 million barrels a day coming to market.

Metals

Base metals continued to enjoy strong support during May, driven to a large extent by the continued manufacturing recovery in China and the rest of Asia. Post COVID recovery strategies remain fundamental anchors for higher demand. Copper is up 4.75% MoM and a whopping 78.66% YoY. Ferrous metals continued to enjoy support by Chinese promises to curb emissions. Tin had the best month gaining 9.16% MoM. Surging US manufacturing demand should continue to drive up demand further.

Precious Metals

Gold benefitted from a softer USD, gaining 8% MoM and will take its next cue from US as well as global inflation. Central banks remain accommodative and price direction for the yellow metal will depend on whether investors think current inflation is structural or temporary. Platinum and Palladium ended down slightly MoM but are still well up for the year. The Palladium deficit is expected to widen further in 2021. Growth in vehicle sales bodes well for Platinum.