Commodity weekly: agriculture surges, metals fall on fading rate cut hopes Commodity weekly: agriculture surges, metals fall on fading rate cut hopes Commodity weekly: agriculture surges, metals fall on fading rate cut hopes

Commodity weekly: agriculture surges, metals fall on fading rate cut hopes

Ole Hansen

Head of Commodity Strategy

Key points

  • The Bloomberg Commodity TR index hits 17-month high before suffering a small setback amid profit taking hitting the metal sector
  • Crude oil remains under pressure ahead of the June 2 OPEC+ meeting leaving the group with little room for manoeuvre
  • Gold, silver, and copper all suffering setbacks following latest momentum-led surge
  • Agriculture strength highlighting challenging weather conditions across key growing regions

The Bloomberg Commodity Total Return index hit a fresh 17-month high earlier this week, supported by strong rallies across industrial and precious metals, before suffering a small weekly loss after minutes from the latest FOMC meeting reiterated the higher-for-longer stance on rates with some officials even discussing whether current policies were restrictive enough. The short-term interest rate futures market responded by lowering the expected number of interest rate cuts this year to just one, and only after the US Presidential election in November.

The Invesco Bloomberg Commodity UCITS ETF trades up 8% year to date as it seeks to replicate the return of the Bloomberg Commodity Total Return index, an index which tracks the performance of 24 major commodity futures, spread between energy (30.1%), metals (34.2%), and agriculture (35.7%). Following a year-long consolidation phase the index recently broke higher supported by gains across all the mentioned sectors. Do note the shown ETF is just one of several tracking the BCOM TR Index

Source: Saxo

Having reached a fresh record high at USD 2450, gold suffered a USD 125 correction, in the process heading for its worst week in three months. Silver which earlier in the week surged to an 11-year high at USD 32.50 also suffered a sharp reversal, but for now the semi-industrial metal holds above key support in the USD 30 area. Copper’s premature rally to fresh record high also suffered a correction towards key support in the USD 4.70 to USD 4.75 area. Overall, we maintain a positive outlook and suspect traders and investors will maintain a buy-on-dip strategy across all three metals.

US and especially EU gas prices jumped with the Dutch TTF benchmark hitting a year high in response to an unplanned outage in Norway and renewed concerns about the remaining supplies from Russia. Staying with energy, Brent trades down around 6% on the month, near key psychological support at USD 80, and it has now lost more than half the strong gains seen between December and early April. A recent weakness in refinery margins and weaker time spreads in both WTI and Brent suggesting oil demand has hit a soft patch following a strong first quarter.

However, despite the current softness we still see demand picking up in the coming months amid seasonal strong demand in the Middle East towards cooling, as well as the US summer holiday driving season, and strong demand for jet fuel. All eyes now on the June 2 OPEC+ meeting and how the group will respond to prices trading close to USD 80 instead of USD 90, a price level preferred by most members.

Partly offsetting the mentioned losses across energy and metals were the agricultural sector with the softs and grain sectors both rising, as weather related worries supported continued strong gains in wheat, corn, cotton, and coffee. Wheat futures in Chicago and Paris were heading for another weekly gain, trading at ten-month highs, supported by adverse weather-related crop losses in the Black Sea region, as well as other major producers such as Australia, France, and Germany.

Following a recent and relative deep correction, coffee prices reverted sharply higher amid renewed focus on the damaging impact of dry weather conditions, not least in Vietnam, a key producer of the Robusta bean, leading to the biggest two-day rally since at least 2008. In Brazil dryness and heat remain a concern for most Arabica coffee producing regions, potentially negatively impacting the production outlook.

CBOT Wheat, first month contract:

Source: Saxo

Gold, copper, and silver, some of the recent highflying metals, all ran into profit taking this week after hitting record highs in gold and copper and silver, an 11-year high. Apart from an increasingly overbought market condition, the trigger was the minutes from the latest FOMC meeting in which officials said interest rates will need to stay higher for longer to combat stubborn inflation. Some softness had already started to emerge prior to the announcement amid signs of softening demand amid hesitancy from investors, central banks, and traders to pick up metals at record price levels.

Despite this week’s correction, the Bloomberg precious and industrial metals total return indices both trade up by around 17% this year, however, the combination of high prices deterring some buyers and an even longer wait before the first US rate cut, may now lead to another period of consolidation, the depth of which depends on whether prices drop further to levels that may force hedge funds and CTAs to reduce an elevated exposure. With that in mind gold’s recent correction low around USD 2285 will be key, while in silver the level to watch is whether the spot price will manage to hold above USD 30, a former resistance level turned support following last Friday’s explosive, but now deflating breakout.

We maintain our positive outlook for investment metals with silver potentially enjoying additional tailwind from expected industrial metal strength. We are currently focusing on the below drivers to support prices:

  • Strong retail demand in China amid the desire to park money in a sector seen as relatively immune to a struggling economy and property woes.
  • Continued central bank demand amid geopolitical uncertainty and de-dollarisation, and not least gold’s ability to offer a level of security and stability that other assets may not provide.
  • Rising debt-to-GDP ratios among major economies, not least in the US, raising some concerns about the quality of debt. In other words, rising Treasury yields are not necessarily negative for gold as they raise the focus on overall debt levels and the sustainability of those.
  • In addition, the focus is changing from the negative impact of lower rate cut expectations towards support from a reaccelerating inflation outlook.

Futures and ETF positions held by financial actors highlighting how recent rallies have been underpinned by strong demand from hedge funds and CTAs, especially in the leveraged futures market.

Copper meanwhile suffered a sharp setback after the recent surge to record highs in London and New York, which further deterred demand from physical buyers. Not least in China, the world’s top consumer of copper, where data for weeks has been telling a story about demand softness that financial traders thoroughly ignored amid the bullish price momentum, and the long-term focus on supply struggling to meet strong demand towards the electrification of the world. Recently the mentioning of AI and an anticipated demand for power to run a growing number of data centres supporting AI helped attract new investors into copper, some perhaps not fully understanding how commodities work.

Commodities are spot products where the price is determined by the prevailing balance between supply and demand, not what that balance may look like in six or twelve months’ time. The recent copper squeeze in the High Grade Copper future traded in New York occurred after traders sold into a rising premium between the High Grade copper price in New York and the LME price in London. However, as the spread due to speculative demand for HG futures continued to dislocate, short sellers were eventually forced to buy back their short positions, thereby triggering a dislocation which is only now getting worked back to normal levels.

Overall, we believe the direction of copper remains up, but following the latest surge to a record high - the timing of which occurred somewhat sooner than expected, given the current weakness in underlying demand fundamentals - a period of consolidation looks increasingly likely. Given how far copper has travelled in a relatively short time, the contract can retrace to USD 4.56 or even USD 4.40 per pound without disturbing the bullish setup.

Recent commodity articles:

23 May 2024: Podcast: 2024 is heavy metals
22 May 2024: Crude oil struggles near two-month low
17 May 2024: 
Commodity weekly: Metals lead broad gains 
16 May 2024: 
Gold and silver rally as soft US data fuels market optimism
15 May 2024: 
Copper soars to record high, platinum breaks out
14 May 2024: 
COT: Crude long slump; grain purchases surge
8 May 2024: 
Fund selling exacerbates softening crude outlook
8 May 2024: 
Grains see bumpy start to 2024 crop year
6 May 2024: 
COT: Commodities correction spurs muted selling response
3 May 2024: 
Commodity weekly: Grains boost, correction in softs and energy
2 May 2024: 
Copper's momentum-fueled rally halts amid weakening fundamentals
29 April 2024: 
COT: Gold bulls stand firm despite recent correction
26 April 2024: 
Commodity weekly: Sticky inflation and adverse weather focus
23 April 2024:
 What drives the gold and silver correction ?
22 April 2024: 
COT: Declining momentum may signal shift toward consolidation
19 April 2024: 
Commodity weekly focus on copper, gold, crude and diesel
17 April 2024: 
Copper rally extends to near two year high
16 April 2024: 
Crude oil's risk premium ebbs and flows
15 April 2024:
COT: Hedge funds propel multiple commodities positions beyond one-year highs
12 April 2024: 
Gold and silver surge at odds with other market developments
10 April 2024: 
Record breaking gold highlights silver and platinum's potential
8 April 2024:
COT: Speculative interest in metals and energy gain momentum
5 April 2024: 
Commodity market sees broad gains, enjoying best week in nine months 
4 April 2024: 
What's next as gold reaches USD 2,300
3 April 2024: 
Q2 Outlook: Is the correction over?
3 April 2024: 
Cocoa: A 50% farmgate price boost a step in the right direction
2 Apr 2024:
COT: Gold and crude longs maintained amid strong underlying support


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.