21minersM

Commodities Weekly: Shutdown risks boost demand for hard assets

Picture of Ole Hansen
Ole Hansen

Head of Commodity Strategy

Key Points:

  • The Bloomberg Commodity Total Return Index is heading for a small weekly gain, trading just shy of its highest weekly close in three years, with the year-to-date return now exceeding 10%.
  • The overriding macro theme has been the US government shutdown given the economic impact and uncertainty caused by a prolonged data blackout, creating distortions and impairing transparency, while leaving speculative flows unchecked
  • The top-performing sectors were industrial metals, led by copper, followed by precious metals, as gold hit fresh record highs and silver received a boost from a London cash squeeze. On an individual level, natural gas stood out, rising around 9%.
  • OPEC+ production growth weighed on the energy sector, while cocoa tumbled to a 1.5-year low, with rising farm-gate prices supporting a normalisation. 

The Bloomberg Commodity Total Return Index is heading for a small weekly gain, trading just shy of its highest weekly close in three years, with the year-to-date return now exceeding 10%, masking some notable divergences across sectors, with the phenomenal 49% rally in precious metals (gold and silver), and a 10% gain in industrial metals, led by copper and recently supported by zinc, being partly offset by weakness in energy, albeit only in crude oil and natural gas while the products, led by diesel, trade up on the year. Finally, the agriculture sector trades small down on the year, with heavy losses in grains being offset by individual strong gains across softs and livestock, most notably arabica coffee and cattle.

Returning to this past week, the top-performing sector was industrial metals, led by copper, while natural gas extended its weather-driven rally. Precious metals remained firm, with gold holding close to fresh records, while the energy sector slumped on oversupply worries, led by crude oil and diesel. The overriding macro theme has been the US government shutdown and the uncertainty it injects into data flow, positioning visibility, and investor sentiment. The experience of the 2018–19 record-long shutdown saw a prolonged data blackout create distortions, impairing transparency, while leaving speculative flows unchecked.

 

3olh_wcu1

Shutdown implications for commodities

The latest US government shutdown has already triggered some reactions in commodity markets, with precious metals like gold and silver rallying, while energy and agricultural sectors face heightened risks. Historically, brief shutdowns cause moderate, temporary disruption, but a prolonged standoff may magnify the impacts, fundamentally shifting sector dynamics.

Gold and other metals have benefited modestly from safe-haven flows, as the shutdown highlights fiscal dysfunction, growing US government debt problems, but also the prospect for lower funding costs as the FOMC supports the economy through additional rate cuts.

Crude oil and products remain under pressure this week, and while the prospect for additional OPEC+ supply dominated, a prolonged shutdown may hurt prices for fears of shrinking demand from slower economic activity.

The grains sector sees price discovery challenges without USDA reports, raising volatility risks when data resumes. In addition, farm operators and agribusinesses are hit by halted loans and stalled government payments at a time when harvest pressure and lack of Chinese demand for soybeans continue to weigh on prices.

The temporary US government shutdown will halt Friday’s scheduled release of the CFTC’s closely watched Commitment of Traders report (COT), covering futures positions held across forex, financial markets, and not least commodities. During the 35-day shutdown from 22 December 2018 to 25 January 2019, the flow of positioning data was severely disrupted, with the COT report only catching up by 8 March that year. Depending on the duration of the current shutdown, managed money and other speculative accounts may again operate under the radar for an extended period.

Energy: crude oil and products under pressure

The energy sector was last week’s laggard, with Brent, WTI, diesel, and gasoline all trading sharply lower. OPEC+ production rose strongly in September, with Saudi Arabia alone adding 320,000 barrels per day. Venezuela hit the symbolic 1 mb/d mark for the first time since 2019, and Libyan exports also grew. The result is an uncomfortable supply overhang just as demand signals soften into Q4 and beyond. However, while Brent’s break below USD 65 was technically significant, opening the door to further downside, the so far limited response from traders potentially signalled selling fatigue and a belief the latest drop may dissuade OPEC+ from announcing a bumper increase next month.

For now, however, traders must deal with several headwinds potentially weighing on prices. Refining margins remain compressed, leaving little cushion for products, while oil-on-the-water has risen toward a 10-year seasonal high, underscoring the current imbalance. Market fears that OPEC+ could announce a production hike of up to 500,000 barrels at this Sunday’s meeting. Elsewhere, Iraq is resuming exports to Turkey via Kurdistan, while Russian seaborne crude exports have reached the highest since early 2024 after Ukrainian strikes on refineries reduced domestic demand for crude.

3olh_wcu2
Brent crude, first month cont. - Source: Saxo

Natural gas: weather-driven rally

US natural gas was the week’s top performer, up 7%, supported by early-season heating demand and rising US liquefaction demand for gas, with flows to US LNG plants soon expected to exceed the 16.7 million cubic feet recorded back in April. While production and maintenance events are likely to keep prices volatile, the supporting prospect for a tightening market into 2026—with the November 2026 futures contract trading at an 84-cent premium to the current November contract—has seen a steady rise in the past few months.

Copper: supply tightness trumps macro concerns

Copper gained 5% despite Golden Week removing Chinese buyers from the market. Supply disruptions, most notably at Grasberg in Indonesia, overshadowed macro softness. Visible inventories monitored by the LME and SHFE remain low showing little cushion, with the bulk currently being held stateside. The market’s willingness to rally without Chinese participation underscores a structural tightness narrative.

The Grasberg disruption recently helped LME copper break key resistance at USD 10,160 per tonne, with prices climbing to a May 2024 high near USD 10,600. In New York, HG copper futures traded back above USD 5 per pound for the first time since the late-July non-tariff price collapse. Adding to the momentum, a tightening supply outlook has drawn in additional investment demand—mirroring the flows recently seen in silver and platinum, which along with gold have both benefitted from the so-called debasement trade, a function of investors being concerned about the viability of fiat currencies, instead seeking safety in hard assets, especially those with an already tight or tightening supply outlook.

Gold and silver: resilient despite overbought signals

Gold’s powerful rally since Powell shifted his tone at Jackson Hole in August, at the same time as political noise challenged the Fed’s independence, triggered a technical breakout that has since lifted prices by 16.5%. Several new records have been set, the latest just below USD 3,900, a level that has so far triggered profit-taking and consolidation given stretched technical readings.

The usual risk of a pullback during China’s Golden Week, when physical demand tends to ease, has not yet emerged. Instead, investors in the West have stepped in, with gold-backed ETF holdings having risen 150 tonnes since August, reaching a three-year high near 3,025 tonnes. This shows how speculative buyers and real-money accounts continue to “buy the dip.”

With many potential investors suffering from vertigo following a 45% year-to-date rally, the bigger question is whether we are seeing a paradigm shift in how tangible assets such as metals are perceived. In a more fragmented world, where the West has weaponised markets, payment systems, and monetary channels, sanctions and asset freezes have eroded trust in traditional safe havens—particularly the dollar and US government bonds.

China remains central. If households keep diverting flows from property into gold, the trend could persist. Together with central-bank demand since 2022—when Russian reserves were frozen—this shift has helped break down long-standing correlations and may explain why gold keeps defying gravity. Crucially, Chinese imports are a one-way flow: once gold is inside the country it cannot easily be exported.

Having sliced through several former peaks dating back more than a decade, silver is now homing in on the 2011 record high just below USD 50 per ounce. The spot market is experiencing a squeeze, with lease rates — the cost of borrowing silver — surging to extreme levels this week, underlining how depleted stockpiles monitored by the London Bullion Market Association have become. Whether this momentum holds will hinge on the pace of supply from China once markets reopen after the Golden Week holiday
3olh_wcu3
Spot Silver - Source: Saxo

Grains: harvest pressure and trade headwinds

Grains traded mixed, with corn and wheat both sliding, while soybeans managed to stay marginally positive. USDA’s quarterly stocks report surprised with corn supplies at 1.53 billion bushels, 15% above trade expectations. With harvest pressures weighing on prices in general, speculators, according to the latest Commitment of Traders Report - held net short positions across all six major CME-traded grain and oilseed contracts for the first time in 20 months. The combined net short was also the largest ever recorded for this period.

This highlights a market where speculators currently view the path of least resistance as lower, reinforced by the steep contango structure across key crops. In such an environment, short sellers can profit even if outright prices remain unchanged. A key focus ahead is the end-October meeting between Trump and Xi Jinping in South Korea, where Trump is expected to raise the issue of soybean purchases. US soybean farmers are urgently seeking a deal that could restore demand from China, which normally buys 60% of exports but has yet to purchase any soybean cargo from the current harvest.

Cocoa grower price hikes signal supply normalisation

Cocoa futures in New York have slumped to a 1½-year low, down 9% on the week to trade near USD 6,300 per metric ton. The decline has been driven by speculation that higher farm-gate prices in Ghana and Ivory Coast will encourage sales of previously held-back stocks while also boosting future crop supplies. In recent years, low payments to growers in Ivory Coast — combined with adverse weather — were key reasons behind the sharp rally, as higher global prices failed to translate into increased production. That outlook is now shifting, and weather permitting, the prospect of stronger supply points to prices heading lower, though not all the way back to pre-spike levels around USD 2,600 per ton.

3olh_wcu4
Cocoa, first month future - Source: Saxo
Related articles/content             
1 Oct 2025: Grain markets pressured by harvest and rising stocks
30 Sept 2025: Month-end and Chinas Golden Week cool golds record run
29 Sept 2025: COT on FX and Commodities - Week to 23 September 2025
26 Sept 2025: Commodities weekly Riding a wave of broad-based strength
25 Sept 2025: Copper Grasberg disruption adds fuel to robust demand outlook
24 Sept 2025: Precious metals surge to fresh highs as Fed cuts add fuel
22 Sept 2025: COT on Forex and Commodities - Week to 16 September 2025
17 Sept 2025: In demand gold and silver brace for Fed decision
15 Sept 2025: COT on Forex and Commodities - Week to 9 September 2025
11 Sept 2025: High tech needs low tech AIs power appetite and coppers constraint
8 Sept 2025: COT on Forex and Commodities - Week to 2 September 2025
5 Sept 2025: Commodities weekly Metals lead crude heavy ags under pressure
4 Sept 2025: OPEC supply expansion and Russias export woes keep crude rangebound
3 Sept 2025: Gold breaks to fresh record as investors seek alternatives in a fractured world
1 Sept 2025: Silver powers past USD 40 to 14-year highs
1 Sept 2025: COT on Forex and Commodities - Week to 26 August 2025
28 Aug 2025: Steepening US yield curve and what it means for gold
27 Aug 2025: US lumber futures erase tariff gains hint at housing slowdown
26 Aug 2025: Trouble at the Fed supports gold and silver
25 Aug 2025: COT on Forex and Commodities - Week to 19 August 2025
22 Aug 2025: Commodities weekly ags and energy steady the ship metals lag as Powell looms
21 Aug 2025: Crude oil supported by US inventory decline robust demand and weak positioning
19 Aug 2025: Gold and silver still boxed in waiting for the next catalyst
18 Aug 2025: COT on Forex and Commodities - Week to 12 August
15 Aug 2025: Commodities weekly metals and softs rise in August as energy and grains slide
14 Aug 2025: Weekly gains across soft commodities on weather and policy-induced risks
13 Aug 2025: WASDE projects record corn crop tighter soybeans wheat under pressure
11 Aug 2025: COT on Forex and Commodities - 11 Aug 2025
8 Aug 2025: Tariff shock sends gold futures soaring yet spot market holds the real signal
6 Aug 2025: Crude oil caught between supply surge and geopolitical tensions
5 Aug 2025: Trump tariffs copper chaos and the metals that still matter
4 Aug 2025: COT Report: Speculators cut metals and grain exposure ahead of copper rout
9 July 2025: NY copper surges on 50 Trump tariff threat
8 July 2025: Gold silver platinum take a timeout after strong first half
7 July 2025: Crude prices steady as OPEC fast-tracks output hike
3 July 2025: Commodities Foundations set for the next bull run


Educational resources:
The basics of trading wheat online
A short guide to trading copper
Gold, silver, and platinum: Are precious metals a safe haven investment?

Daily podcasts hosted by John J Hardy can be found here


More from the author             
This content is marketing material and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results.
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options..

Quarterly Outlook

01 /

  • Q4 Outlook for Investors: Diversify like it’s 2025 – don’t fall for déjà vu

    Quarterly Outlook

    Q4 Outlook for Investors: Diversify like it’s 2025 – don’t fall for déjà vu

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Q4 Outlook for Traders: The Fed is back in easing mode. Is this time different?

    Quarterly Outlook

    Q4 Outlook for Traders: The Fed is back in easing mode. Is this time different?

    John J. Hardy

    Global Head of Macro Strategy

    The Fed launched a new easing cycle in late Q3. Will this cycle now play out like 2000 or 2007?
  • Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally

    Quarterly Outlook

    Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Q3 Macro Outlook: Less chaos, and hopefully a bit more clarity

    Quarterly Outlook

    Q3 Macro Outlook: Less chaos, and hopefully a bit more clarity

    John J. Hardy

    Global Head of Macro Strategy

    After the chaos of Q2, the quarter ahead should get a bit more clarity on how Trump 2.0 is impacting...
  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

The information on or via the website is provided to you by Saxo Bank (Switzerland) Ltd. (“Saxo Bank”) for educational and information purposes only. The information should not be construed as an offer or recommendation to enter into any transaction or any particular service, nor should the contents be construed as advice of any other kind, for example of a tax or legal nature.

All trading carries risk. Loses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money.

Saxo Bank does not guarantee the accuracy, completeness, or usefulness of any information provided and shall not be responsible for any errors or omissions or for any losses or damages resulting from the use of such information.

The content of this website represents marketing material and is not the result of financial analysis or research. It has therefore not been prepared in accordance with directives designed to promote the independence of financial/investment research and is not subject to any prohibition on dealing ahead of the dissemination of financial/investment research.

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.