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Commodities Weekly Wrap

Pressure from rising Treasury yields likely to resume

This week the prices of most commodities got a boost as investors pared back expectations for rate hikes in the US, following lower than expected inflation data. That said, we still expect a further small rise in the US 10-year Treasury yield by the end of the year, which could put renewed downward pressure on the prices of commodities, and particularly gold, in the coming months. Supply disruption caused by the war in Ukraine seems to be easing, as grain ships have continued to leave Ukrainian ports. Meanwhile, there were renewed efforts to revive the 2015 Iran nuclear deal. While there are still hurdles, if a deal were agreed, we would expect a rapid rise in Iranian oil output, which would weigh on oil prices. Next week, we’ll be paying close attention to the latest activity and spending data from China on Monday. We expect that the data will show that the post-lockdown recovery lost steam in July, alongside a renewed deterioration in the property sector, which could weigh on industrial metals prices next week.

12 August 2022

Commodities Update

Gloomy outlook for use of agriculturals in industry

Deteriorating global economic growth over the coming quarters will weigh on industrial demand for cotton, natural rubber and lumber. That said, high oil prices will offer some support to cotton and natural rubber prices, and our expectation for rate cuts in the US in late 2023 could boost the price of US lumber.

10 August 2022

Commodities Update

China’s copper imports are the only bright spot

Commodity import volumes remained lacklustre in July, consistent with subdued activity in heavy industry and construction. We think import growth should tick up in the coming months in response to higher infrastructure spending and a modest pick-up in activity. But renewed lockdowns pose a downside risk. Oil and the Gulf Drop-In (9th Aug): What’s the outlook for oil prices and what does that mean for Gulf economic outperformance? Join economists from our Commodities and Emerging Markets teams for this 20-minute briefing. Register now.

8 August 2022

Key Forecasts


Pressure from rising Treasury yields likely to resume

Commodities Weekly Wrap

30 November 2022

Our view

Most non-energy commodities prices have fallen recently on the back of rising concerns about slower global economic activity and heightened risk aversion. By contrast, energy prices have held up rather better as supply concerns remain paramount. Indeed, natural gas prices in Europe and Asia have soared as Russia reduced supply to Europe. We think energy prices will stay high this year owing to constrained supply and risks to supply given the war in Ukraine and Western efforts to boycott Russian energy exports. That said, we expect the price of oil to start to ease back as we move into 2023 as supply chains adjust, higher prices incentivise supply and demand growth slows. We also expect other commodity prices to fall a little further, although we suspect that the big drops are behind us. Some fiscal stimulus in China will shore up metals demand, particularly as supply will remain constrained owing to high production costs (outside China) and low exchange stocks. The price of gold also looks set to fall further as inflation rates ease back and the historic inverse relationship with US real yields is restored. Elsewhere, the prices of agricultural commodities, which should fall a little more as production picks up, incentivised by earlier high prices.

Latest Outlook

Commodities Outlook

Prices to find a floor

While non-energy commodities prices may fall a little further, we think the big move down in those prices is now behind us. Admittedly, the demand outlook has undeniably deteriorated in recent months, but many of the supply risks that prompted prices to soar earlier in the year are still with us. Moreover, our forecast of persistently high energy prices means that the cost of production of most other commodities will remain elevated for much of this year and into 2023.

28 July 2022