Industrial metals prices weighed down by trade, demand fears

Commodity chart picks

Ole Hansen

Head of Commodity Strategy

Summary:  What the charts currently tell us about the direction of copper, gold-platinum and crude oil.


HG copper jumped yesterday on the Trump administration’s decision to resume talks with China while delaying some tariffs from September 1 to December 15. Although we are seeing the rally fade somewhat today the white metal’s ability in recent weeks to manage a deterioration technical and fundamental outlook could bode well for the short-term outlook.

The technical picture has improved following the failed attempt to break below the $2.57/lb neckline on the weekly chart. The fundamental outlook has been weighed down by concerns that the trade war would accelerate the slowdown in global growth, thereby erode demand, not least from the world’s two biggest consumers.

Macro driven funds looking for a hedge against recession have accumulated a record short in HG copper futures. During a two-week period to August 6 money manager more than doubled their net-short to 74.6k lots, a position which is now somewhat under water. Continued short covering will find resistance at $2.67/lb. and most importantly $2.70/lb.

Source: Saxo Bank

Gold’s phenomenal rally to a six-year high was tested yesterday following the US tariff announcement. The violent $55/oz retracement from $1535/oz was more an indication of how crowded the trade has become than a change in the fundamental outlook. We maintain a bullish view on gold driven by the race to bottom in global yields and central banks turning into easing mode. But in the short-term it might be worth take a closer look at platinum which has been struggling amid the downturn in global car sales and production.

The discount to gold reached a record $668 yesterday before recovering to the current $650. While the speculative gold net-long reached a near record high in the week to August 6 the equivalent long in platinum is bang on the five-year average so not stretched at all. Traders worried about a technical correction in gold may find some value in switching to platinum instead. 

Source: Saxo Bank

Crude oil has spent the past month trading within a near 15% range with continued downgrades to global demand growth only somewhat being off-set by tightening supply from Opec+. One key development has been the contraction in WTI’s discount to Brent crude oil from $11/b back in June to the current $4.5/b. The spread has narrowed in response to the global slowdown impacting Brent, the global benchmark, and increased concerns that US shale oil producers will struggle to meet their production growth targets. This as many producers continue to burn cash while relying on funding to stay operational.

While Brent crude has recovered back above $60/b the technical outlook for WTI looks somewhat better after once again managing to find support above $50/b. The range-bound behavior however looks set to continue with focus on US-China trade talks and continued production restraint from Opec led by Saudi Arabia.

The WTI chart below points towards resistance at $68.80/b, the recent high and trend-line from the April high.

Source: Saxo Bank

Later today at 14:30 GMT the US Energy Information Administration will release its ‘Weekly Petroleum Status Report’. Some fireworks can be expected given the discrepancy between market expectations for a 2.5 million barrel drop and the 3.7 million barrel increase reported by the American Petroleum Institute last night. The table of expectations can be found here.

Quarterly Outlook

01 /

  • 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

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • 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, ...
  • 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

  • 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

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • 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

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Capital Markets UK Ltd. (Saxo) and the Saxo Bank Group provides execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation. Access and use of this website is subject to: (i) the Terms of Use; (ii) the full Disclaimer; (iii) the Risk Warning; and (iv) any other notice or terms applying to Saxo’s news and research.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer for more details.

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

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. Android is a trademark of Google Inc.

©   since 1992