Copper, one of the raw materials with the strongest fundamental prospects, was another key commodity that poked its head above its recent $4 to $4.2 consolidation range. The move came in response to a report from Goldman Sachs titled "Green Metals - Copper is the new oil", in which they raised their price forecasts and now say that by 2025 copper could rise by more than 60%
The green transformation remains the key source of increased demand as usage in EV’s and renewable energy projects such as solar and wind surge. At the center of the forecast is a warning from both Goldman’s and Trafigura Group that the market will be ‘drastically’ short of copper in the next few years unless prices rise sharply to spur supply. High startup capex and the 5 to 10 year period from investment decision to production could create a prolonged period of mismatch between surging demand and inelastic supply.
The biggest short-term challenge remains the ongoing developments in China, the world's top consumer. In an attempt to curb rising asset prices through the use of leverage accounts, the People's Bank of China has been tightening liquidity. One of the biggest casualties so far has been the stock market where the CSI 300 has lost 18% since hitting a decade high back in February.
Gold, the most interest rates and dollar sensitive commodity, rallied to challenge and eventually break resistance at $1765/oz a key level that we have been highlighting in our latest updates. While rates and the dollar sets the overall direction, it is clear the loss of momentum in recent months was a major reasons why money managers at the beginning of March had cut bullish futures bets by 85% from the peak last February.
During the past month, however, buyers started to return and the recent rejection below $1680 helped trigger a 53% increase in the net long to 7.7 million ounces during the week to April 6. As per the chart above, a sustained break higher would significantly improve the technical outlook and potentially kickstart renewed momentum and with that demand from investors in both futures and exchange-traded funds.
Grains: The Bloomberg Commodity Grains Index reached a near five-year high on a combination of strong demand at a time where farmers in the US, Canada and Europe are already battling with dryness this early in the planting and growing season. Adding to this are ongoing worries in South America and the risk is for a continued decline in already falling global stock levels. These developments have driven corn prices to an eight-year high while spring-wheat (Minneapolis) futures have rallied to a near four-year high with Chicago wheat also picking up some momentum.
Lumber: The cost of building an average new U.S. house has jumped by more than $24,000 as the cost of lumber continues to surge higher. Years of low prices had cut supply and closed mills just before last years unexpected boom as the pandemic and lockdowns sparked a wave of DIY upgrades, renovations and purchase of bigger homes. An acute tightness across the entire timber supply chain has seen the lumber future, currently at a record $1260 per 1000 board feet length trade more than $800 above the average price seen during the previous five years.