Commodity weekly: Some weakness seen ahead of critical week

Ole Hansen

Head of Commodity Strategy

Key points in this update:

  • The commodities sector is closing the week with losses, largely led by declines in the energy and industrial metals segments
  • Biggest losses occurred across the energy sector, led by continued weakness in natural gas prices amid warmer weather 
  • Gold’s record-breaking rally paused with a mini-correction unfolding ahead of next week’s US elections

The commodities sector is closing the week with losses, largely led by declines in the energy and industrial metals segments. Investors and traders have adjusted positions in anticipation of the U.S. elections on November 5—a pivotal event that introduces considerable binary risks due to the high uncertainty surrounding the outcome. This pre-election repositioning underscores the intricate balance between market sentiment and potential economic impacts. The Bloomberg Commodity Total Return Index, preferred for its diversified exposure to energy, metals, and agriculture, remains up by roughly 5% year-to-date. Gains in precious metals, soft commodities, and industrial metals have offset declines in grains and energy, with the latter dragged down primarily by a steep 41% drop in natural gas.

Energy


The biggest losses occurred across the energy sector, led by continued weakness in natural gas prices amid warmer weather forecasts in the US and Europe, indicating sluggish demand for heating fuels. Crude oil fluctuated with the flow of news from the Middle East, where an initial slump followed Israel’s retaliatory attack on Iran. This was followed by renewed bids ahead of the weekend after Iran threatened further action, potentially via proxies that it backs in Iraq. Additionally, speculation about another delay in OPEC+ plans to restore curbed production, stronger-than-expected US economic data, and China’s stimulus efforts helped stabilise and support prices ahead of key support.

Hedge funds have for now adopted a sell into rallies strategi in crude oil, and combined with an already weak position in the fuel products, especially distillates, amid global demand worries and excess refinery capacity, the directional risk from a positioning perspective seems increasingly skewed to the upside on any supportive change in the technical or fundamental outlook.

Brent Crude - Source: Saxo

Precious metals:


This sector experienced a small weekly decline after gold’s record-breaking rally paused with a mini-correction unfolding ahead of next week’s US elections—a major risk event that had recently driven prices higher despite rising headwinds from robust US economic data and increasing yields, which could reduce the pace and depth of future rate cuts. Depending on the election outcome, we see the risk of a USD 100+ correction next week, especially if the results prevent one party from gaining control of the White House and Congress—an event likely to heighten concerns over excessive government spending, potentially pushing the debt-to-GDP ratio higher while fuelling inflation fears.

Overall, however, we maintain a long-held bullish view on gold supported by concerns over fiscal instability, safe-haven demand, geopolitical tensions, de-dollarisation driving strong demand from central banks, Chinese investors turning to gold amid record-low savings rates, and recently, as mentioned, increased uncertainties surrounding the aftermath of the US presidential election. In addition, the US Federal Reserve is despite a less dovish tone following a number of strong economic data prints still expected to cut rates on November 7, potentially supporting additional demand for bullion-backed ETF’s.

Spot Silver – Source: Saxo

Industrial metals


The BCOM Industrial Metal Index was heading for a fifth, albeit small, weekly decline, led by zinc and aluminium, following a late September rally fuelled by Chinese stimulus and US rate cut expectations that later dissipated on concerns the stimulus measures would insufficiently address China’s significant challenges, especially with the possibility of tariffs on Chinese exports under a potential Trump administration. Some support emerged after China’s manufacturing activity unexpectedly picked up in October, potentially offering sign of improved confidence. In addition to the US election, traders will focus on next week’s key gathering of China’s top legislative body and the upcoming Federal Reserve meeting. 

HG Copper continues to find support near USD 4.30 per pound, with upcoming events potentially determining if this level will continue to attract buyers. Our bullish long-term view remains unchanged, supported by solid demand, especially towards the energy transition, potentially creating a supply shortfall as miners struggle to increase production amid rising input prices, declining ore grades, climate change, and increasing regulatory costs and government intervention. The overall uptrend from the 2020 pandemic low appears well-established and would require a weekly close below USD 4 to change that.

High Grade Copper - Chart source: Saxo

Recent commodity articles:

31 Oct 2024: Crude prices seek stability ahead of key support and US elections
30 Oct 2024: 
Will the US election result spark a gold correction?
29 Oct 2024: 
Podcast: Electrification's surge impact on commodities and equities
28 Oct 2024: 
COT: Crude length cut; silver and platinum see strong demand
25 Oct 2024: 
Commodity weekly: Market jitters on the rise ahead of U.S. elections
23 Oct 2024: 
Crude prices stalled by two-sided market risks
22 Oct 2024: 
Gold and silver's remarkable run in four charts
22 Oct 2024: 
Podcast: The Trump trade enters the metal market
21 Oct 2024: 
COT: Dollar shorts squeezed; Shift in commodity exposure from energy to metals
18 Oct 2024: 
Commodity weekly: Gold's record-breaking run continues
17 Oct 2024: 
Copper prices decline amid doubts about China stimulus impact
16 Oct 2024: 
How high can gold and silver rally?
8 Oct 2024: 
Podcast: Navigating market shifts: Fed rate cuts, commodities and rising food prices
8 Oct 2024: 
Video: These commodities might be impacted by the US election
7 Oct 2024: 
Crude oil surge caps strong four-week rally for commodities
7 Oct 2024: 
COT: Broad buying momentum persists, led by Brent, copper and grains
2 Oct 2024: 
Q3 2024 Commodity Outlook: Gold and silver continue to shine bright
30 Sept 2024: 
COT: Fed and PBOC trigger largest weeklyl surge in commodities demand in a decade
27 Sept 2024: 
Commodity weekly: Industrial metals gain strength during a week of crude weakness
26 Sept 2024: 
Crude prices drop again as Saudi and Libya supply concerns grow
24 Sept 2024: 
Fed and PBOC add momentum to commodities market rebound
23 Sept 2024: 
COT: Dollar short reduced; Investment metals see strong demand ahead of FOMC
20 Sept 2024: 
Commodity weekly: Commodities boosted by bumper rate cut
20 Sept 2024 
Video: Gold or silver, which metal will perform the best
17 Sept 2024: 
With gold reaching new heights, silver shows potential
16 Sept 2024: 
COT: Record short Brent and gas oil positions add upside risks to energy
11 Sept 2024: 
Crude slumps amid technical selling and recession fears
10 Sept 2024: 
US Election: will gold win in all scenarios
9 Sept 2024: 
COT: Crude long cut to 12-year low; Dollar short more than doubling
5 Sept 2024: 
Can gold overcome the 'September curse'?
4 Sept 2024: 
Wheat rises on European crop worries
3 Sept 2024: 
Chinese economic woes drag down crude oil and copper
2 Sept 2024: 
COT: Commodities see broad demand as the USD slumps to a net short

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.