The last number of years saw the Softs sector explode as one after the other of its markets was driven to new all-time highs by adverse global weather.
For much of the spring and summer the Metals sector looked to have taken the baton from Softs, only to find renewed selling at the end of July.
With gold a safe-haven market and platinum moving on short supplies, the focus is on silver and copper as reads on global economies.
Over the past couple months, the Metals sector moved into the spotlight in the commodity complex. Questions started coming in about platinum[i] and copper[ii], all while the more better-known markets of gold and silver continued to do their thing. The theme of my conversations this summer have markets in the Metals sector could do something similar to what has been seen in Softs over the past number of years: Each one taking the baton and running to new all-time highs, as if in a relay race.
What drove Softs higher? Given the sector is made up of markets considered weather derivatives, the key factor was adverse weather affecting key growing areas around the world. We could see this play out in the various forward curves as backwardations continued to strengthen. Even today (Wednesday, August 6) we see bullish fundamentals indicated by these same forward curves in cocoa (CCU25), coffee (KCU25), and orange juice (OJU25). It will be interesting to see how these fundamental reads change as we make our way toward and through the last quarter of the year.
Here’s where things get tricky for markets in the Metals sector, though. They aren’t weather derivatives, but rather separated into categories of precious and industrial, with some fitting in both. This past spring and summer saw renewed buying interest in a number of markets as global political and economic situations – I don’t know how to finish that sentence. Stabilize? No. Improve? Not really. Remain in a state of certain uncertainty? Let’s go with that.
Then, just as the calendar page turned from July to August, sellers came back to some of the Metals markets. Let’s take a look at where some of these sit this first week of the month.
The Cash Gold Index (GCY00) hit a new all-time high of $3,495.89 during April, only to spend the time since consolidating just below that mark. The reality is gold, as a precious metal, remains THE safe-haven play at this time of global chaos. Almost every day and/or week we see stories about how central banks around the globe continue to buy gold, regardless of the price. Like Softs and adverse weather, the storm created in global politics should keep Gold well supported for the foreseeable future.
