Macro overview
August has up to now been formed by a tug-of-war between supportive supply-side tales in elements of the commodity market and macro headwinds from weakening financial information within the US and world wide. The newest US inflation information, within the type of a hotter-than-expected July PPI, compelled markets to recalibrate their Fed expectations. Only a day after Scott Bessent, the Secretary of the Treasury, known as for an aggressive 150 bp charge lower, the info cooled speak of a jumbo transfer in September, with the market now firmly pricing in a modest 25 bp discount.
US 10-year Treasury yields nonetheless have edged decrease throughout the month, with the 2-year tenor falling probably the most amid the talked about prospect of incoming charge cuts and expectations the following chair of the Federal Reserve changing Jerome Powell early subsequent 12 months will likely be rather more inclined to argue for the cuts so desperately sought by President Trump and Bessent. Following a short interval of power final month, the US greenback has resumed its broad decline with notable weak spot seen towards its main friends, led by GBP, JPY, and EUR.
This mixture—decrease yields and renewed greenback weak spot—has up to now this month helped underpin non-yielding funding property reminiscent of metals; nonetheless, with silver, platinum, and copper seeing a lot of the demand as gold stays properly and really caught midrange ready for the following catalyst.
General, from a place of current power, US financial information has began to point out indicators of weak spot, becoming a member of different economies with world PMIs pointing to slowing momentum in elements of Europe and Asia. Friday’s information dump from China confirmed an across-the-board slowing economic system in July, suggesting an impression from Beijing’s crackdown to curb overcapacity in companies from metal to photo voltaic and EVs, excessive climate, and spillovers from Donald Trump’s tariffs. The oil market stays fixated on the interaction between demand downgrades and OPEC+ provide coverage, whereas in agriculture, the most recent WASDE report triggered sharp strikes within the grains advanced. Comfortable commodities, led by espresso, have been the standout winners due to idiosyncratic climate and coverage drivers.
Commodity sector snapshot
The Bloomberg Commodity Complete Return Index is down round 1% month-to-date, decreasing the year-to-date achieve to simply 4%, with power in softs, industrial metals, and valuable metals offset by losses in grains and, most notably, the vitality sector.
Softs have outperformed on climate considerations, low change inventories, and coverage uncertainty in key producing nations. Industrial metals have been supported by fading tariff considerations and a copper provide disruption in Chile, whereas an environmental catastrophe at a China-owned mine in Zambia underscores the challenges of securing the minerals wanted to fulfill rising energy demand, with copper as the important thing conductor. Treasured metals, as talked about, have seen silver and platinum outshone rangebound gold, not least resulting from their industrial linkage and a tightening provide outlook.
On the draw back, grains, led by corn and wheat, got here underneath strain from the USDA’s projection of a report US corn crop, whereas vitality suffered from a mixture of downgraded demand development, rising inventories, and OPEC+ continued unwinding of manufacturing cuts into what might develop into an oversupplied market.
Power: rising provide and macroeconomic headwinds
Crude oil costs have struggled in August, with Brent and WTI each down greater than 7% and buying and selling close to two-month lows. The Worldwide Power Company’s newest report lower its demand development forecast for 2024, citing weaker industrial exercise and slower transport gasoline consumption. On the similar time, OPEC+ has reaffirmed plans to totally unwind its voluntary manufacturing cuts by September, bringing barrels again right into a market that has began to point out indicators of a surplus.
Nevertheless, it’s price noting that solely a comparatively small a part of the two.5 million barrel improve that the eight OPEC+ members have agreed to has up to now been delivered. Partly resulting from restraint from producers that exceeded their quotas in current months, whereas some producers have struggled to extend output, and eventually resulting from robust summer season demand amongst producers decreasing what was accessible for exports. As well as, costs have held up comparatively properly resulting from considerations about secondary sanctions on Russian provide and Chinese language stockpiling, which in keeping with the IEA, constructed by round 900,000 barrels per day within the second quarter.
US and OECD industrial inventories have risen, refining runs are seasonally excessive, and product cracks—particularly diesel—have softened. With backwardation narrowing, the market is signalling much less concern over near-term provide tightness. The geopolitical danger premium tied to the Trump–Putin assembly in Alaska is now a secondary driver, and except talks break down sharply, the macro drag from the demand outlook could hold a lid on rallies, with Brent probably struggling above USD 70 per barrel.
Notoriously unstable US pure fuel is likely one of the weakest performers this month, down greater than 8%. Storage injections proceed to outpace the five-year common, leaving inventories 6.6% above regular ranges for this time of 12 months. With out a important late-summer heatwave or main hurricane disruption to Gulf Coast manufacturing, the ample storage cushion will restrict upside, although weather-driven volatility might reassert itself shortly.
Treasured metals: silver outshines gold
Gold initially traded decrease after a stronger-than-expected US PPI print, on hypothesis it could dampen charge lower expectations by pointing to a possible upside in July’s Core PCE inflation, probably conserving the Fed cautious. Rising producer enter prices danger both squeezing firm margins or being handed via to customers, including upward strain on CPI. Nevertheless, the info doesn’t change our long-held bullish view on gold, because the FOMC will finally must stability inflation management with financial help.
For now, nonetheless, gold stays properly and really caught in a USD 200 vary centred round USD 3,350. Nonetheless, underlying ETF demand stays agency, rising to a two-year excessive at 2,878 tons (Bloomberg), suggesting that the market’s longer-term bullish narrative—constructed round eventual Fed easing and lingering stagflation dangers—is undamaged. The near-term focus will likely be on the July Core PCE launch and its implications for September’s FOMC assembly, and likewise the annual gathering of central bankers at Jackson Gap from 21–23 August.
Silver has outperformed gold this month, up near 4%, aided by its twin function as a valuable and industrial metallic. Stronger industrial demand expectations, and the prospect for a tightening provide outlook, mixed with technical shopping for because the gold–silver ratio drifts in the direction of final month’s low close to 86, have supported costs. The market stays delicate to shifts in world manufacturing information and the USD path, however silver retains extra upside beta than gold in a softening greenback surroundings. From a technical perspective, USD 35 stays with sustained break above USD 38.50 wanted earlier than the eye turns to the psychological degree at USD 40.
Industrial metals: coverage noise fades, fundamentals regain focus
Copper has steadied after July’s tariff turmoil, which noticed US costs hunch relative to London as merchants reacted to the prospect of tariffs on key types of imported refined metallic. Clarifications and partial exemptions have helped slim the Comex–LME unfold, shifting consideration again to fundamentals. China’s newest commerce information hinted at some stabilisation in imports, whereas mine provide points in South America stay on the radar.
Grains: WASDE reshapes the panorama
The USDA’s August WASDE report jolted the grains market. Corn futures dropped sharply to contract lows after the company projected a report 16.7 billion bushel harvest, pushed by expanded planted acreage and beneficial summer season climate. Increased ending shares forecasts bolstered the bearish tone, and the futures curve has shifted to a extra snug carry construction, which inadvertently helps speculators already holding an elevated internet quick place.
Soybeans moved in the wrong way, supported by a smaller-than-expected crop estimate and tighter stability sheet. Whereas positive aspects have been modest in contrast with the sell-off in corn, the market is holding a danger premium into the South American planting season, the place early climate developments will likely be key. As well as, ongoing commerce talks with China stay on the radar, not least after President Trump urged China to quadruple their buy of US-produced beans.
Wheat adopted corn decrease, additionally hitting a contract low, with ample world provides—notably from the Black Sea and Europe—conserving export competitors intense. High quality considerations in elements of Europe have offered some localised help, however not sufficient to offset the general bearish provide image, which within the quick time period might result in decrease provide as farmers, annoyed with low costs, maintain again provides.
Softs: espresso takes the crown
Arabica espresso is the clear standout in August, rallying greater than 10% month-to-date. The transfer has been pushed by a mixture of Brazilian climate considerations, low licensed change shares, and a few tariff-related uncertainty including to speculative curiosity. The market stays delicate to shifts in Brazil’s climate outlook and export tempo.
Sugar has additionally posted modest positive aspects, underpinned by coverage uncertainty in India, the place selections on export quotas might tighten world provide. Output from Brazil’s Centre-South area has been strong, however the stability between robust manufacturing and export restrictions elsewhere is conserving costs supported.