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Commodities weekly: Diverging supply trends boost platinum, weigh on crude
Commodities
Ole Hansen
Head of Commodity Strategy
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Key points in this update:
- Global risk sentiment took a knock this week after US Treasury yields surged fueled by mounting concerns of the expanding U.S. fiscal deficit
- A weaker dollar despite rising yields reflecting loss of confidence in the U.S. as a risk-free investment, driving investors towards other regions and safe-haven assets like gold and the Swiss Franc.
- Platinum, this week's highflyer, surged more than 10% to reach a fresh one-year high supported by momentum buyers amid a tightening supply outlook.
- Crude quickly surrendered an Israel-Iran related risk premium amid speculation key OPEC+ producers are planning another bumper production increase in July, the third in a row.
- Weather risks gave the grains sector a lift, in the process forcing speculators to reduce bearish bets, most notable in corn and wheat
Global financial markets started the week on a positive note, extending optimism from the previous week after the U.S. and China agreed to a 90-day pause in their escalating trade war. This truce eased punitive tariffs that had begun to weigh on both economies—threatening recession in the U.S. and a slowdown in China’s export-driven growth—helping boost equities and risk sentiment into a second week. However, the rally faded when the 30-year U.S. Treasury yield reached its highest level since 2023, fueled by mounting concerns over the expanding U.S. fiscal deficit. Contributing to these worries were Moody’s recent credit rating downgrade and President Trump’s “big beautiful bill”—a tax and spending package which is projected to add $3–5 trillion to the national debt, stoking fears of higher deficits and inflation. The dollar meanwhile was heading for its worst weekly close since December 2023, despite high Treasury yields, reflecting a loss of confidence in the U.S. as a risk-free investment, driving investors toward other regions and safe-haven assets like gold and the Swiss Franc. Having been passed by the House, the bill is now heading to the Senate where a handful of Senators have a problem with the version the House passed. The Republicans can only afford to lose three votes in the Senate and the bill could be split up and any changes would have to revert to the House for a vote before Trump signs it into law. In other words, we don’t know the final impact here or how the treasury market or the USD will react once a deal has been hammered through both houses. Investors nevertheless grew wary that the Federal Reserve and other central banks might need to keep interest rates elevated longer to offset inflation driven by fiscal expansion. In the near term, sentiment in the bond market is so negative that a rebound is possible - especially if the Senate forces through a watered down version - which could support risk assets, but longer-term concerns over fiscal policy are likely to dominate market direction in the months ahead. Meanwhile, trade talks between the U.S. and major partners—including China, Japan, and Europe—continue, fostering some optimism despite the lack of significant breakthroughs. Fiscal worries also weighed on the dollar, while gold surged toward its best week in a month. This move was supported not only by debt-related anxiety but also by a CNN report citing U.S. intelligence that Israel is preparing a strike against Iran. Gold's rally may signal the end of a recent consolidation that had shaved $380 off its price since peaking at a record $3,500 on April 22. Platinum, this week's highflyer, surged more than 10% to reach a fresh one-year high after briefly exceeding the 2024 peak at USD 1,096—supported by momentum buyers amid a tightening supply outlook.
The Bloomberg Commodity Index—which tracks 24 major commodities across energy, metals, and agriculture—remained range-bound over the past six weeks, with gains in some sectors offsetting losses in others. This week, however, the index was up by 1.3%, lifting the year-to-date gain to 5.3%, supported by a rebound in gold and other investment metals, as well as the first increase in grain prices in six weeks. The latter was driven by adverse weather conditions affecting global wheat production forecasts.
Industrial metals posted a modest gain, led by a renewed tariff-driven premium on New York-traded high-grade copper over its London counterpart. These gains were partly offset by losses in the energy sector, amid expectations of third consecutive and large production increase from eight OPEC+ members, and falling soft commodity prices, especially cocoa and coffee.
Platinum, the forgotten metal springs back to life
Platinum—an often-overlooked, semi-industrial metal primarily mined in South Africa—is finally showing signs of life after a decade of sideways trading. Used largely in catalytic converters and laboratory equipment, platinum surged over 10% this past week. The rally was fueled by expectations of a third consecutive annual supply deficit and rising demand in China for platinum bars, coins, and jewelry, as investors take advantage of its relative cheapness—particularly against gold. The gold-to-platinum price ratio hit a peak of 3.6 in April (i.e., one ounce of gold equaling 3.6 ounces of platinum), but has since narrowed to around 3.
Momentum accelerated after the World Platinum Investment Council’s latest Platinum Quarterly report projected a deepening market deficit—nearly one million troy ounces—marking the third straight year of shrinking above-ground inventories. Notably, platinum also broke above a 17-year technical downtrend this week. However, while momentum traders briefly pushed prices above the 2024 high of USD 1,096, a sustained breakout is not yet confirmed. More positive price action, potentially above USD 1,134 is needed to distinguish a true trend reversal from a mere range extension.
Gold attracts renewed demand amid fiscal debt focus
Gold rebounded sharply following its steepest correction since 2023, driven by renewed concerns over U.S. fiscal health. This highlights a shift in traditional correlations, as gold typically struggles when interest rates rise. In this case, however, rising bond yields—reflecting increased U.S. funding costs—are themselves reinforcing the appeal of gold as a hedge, as they signal deteriorating government creditworthiness.
Having already reached our 2025 target of USD 3,500, we now adopt a cautious, wait-and-see stance. The market is caught between profit-taking and renewed dip-buying. Despite the recent pullback, core structural drivers remain intact: strong central bank buying, geopolitical tensions, fiscal instability, and persistent inflation concerns. From technical analytic perspective, a break above USD 3,355, the 0.618 Fibonacci retracement of the latest correction, may signal a renewed push towards fresh highs.
Risk of another OPEC+ output surge weighs on crude
Crude oil markets have stabilized following a sharp April selloff, with WTI trading between USD 55–65 and Brent between USD 58.50–68.50—a volatile but contained USD 10-per-barrel range.
This week, attention turned to the Middle East after Iran’s Supreme Leader Ayatollah Ali Khamenei dismissed prospects for renewed nuclear talks, rejecting U.S. demands—particularly on uranium enrichment—as “outrageous.” Geopolitical tension escalated further after a CNN report cited U.S. intelligence suggesting Israel may be preparing to strike Iranian nuclear facilities.
However, any risk premium was quickly offset by growing expectations of a third consecutive OPEC+ production increase, U.S. fiscal uncertainty, and soft demand data ahead of the Memorial Day weekend. In the short term, sentiment in the U.S. bond market appears to be near peak pessimism, and if yields retreat, crude may find support from improved risk appetite. While we remain cautious, we are not overtly bearish and expect oil to stay rangebound within its current wide band.
Weather risks give grains a lift
Grains are on track for their first weekly gain in six weeks, with futures across wheat, corn, and soybeans posting gains. Wheat led the rally, buoyed by supply-side concerns both domestically and abroad. Short covering by speculators—who’ve held a net short position in Chicago wheat for a record 149 consecutive weeks—added fuel to the move.
Globally, dry weather conditions from China to Russia and Europe are threatening yields, while U.S. prices found additional support from strong export demand and erratic weather that has worsened crop conditions. These developments have prompted a reassessment of the global production outlook and reintroduced volatility into a previously oversold sector.
CBOT wheat futures have been in a sustained downtrend since peaking in 2022, though they’ve found some support near the USD 5 per bushel level in recent months. A persistent contango—where near-term contracts trade below deferred ones—has encouraged speculative short selling, contributing to a record 149-week stretch of net short positions. For a meaningful reversal, the supply outlook must worsen further, driving up front-month prices and potentially triggering a technical breakout akin to the recent move in platinum. For now, we’re watching key resistance at the descending trendline near USD 5.80 per bushel, which must be cleared to confirm a shift in momentum.
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