Commodities weekly – Hard assets, hard weather: metals lead, gas shocks, cocoa cracks

Precious metals: FOMO meets fundamentals

Gold and silver remain at the center of the hard-asset demand narrative. After another week of strong gains, the psychologically potent round numbers of USD 5,000 in gold and USD 100 in silver are now firmly within reach. Momentum has clearly become part of the story, with FOMO playing a visible role as prices push into uncharted territory. Yet it would be a mistake to dismiss the rally as purely speculative.

The broader macro backdrop continues to tilt in favor of precious metals. Central-bank demand remains firm, reinforcing gold’s role as a reserve diversifier at a time when confidence in fiscal discipline is increasingly fragile with persistent government borrowing and a lack of clarity on long-term debt sustainability. The dollar, meanwhile, has softened, and overlaying these with multiple geopolitical uncertainties the appeal of tangible assets, some in scares supply, remains.

Silver adds a layer of complexity. While it shares gold’s monetary appeal, it also carries significant industrial exposure. That dual role can amplify both upside momentum and downside risk. For now, physical demand signals remain robust, particularly in China, where local futures prices continue to command a premium of more than USD 12 per ounce over London prices. Such a gap points to tight regional availability and strong end-user appetite, even as global prices surge. Still, the risk of demand destruction cannot be ignored if prices accelerate too far, too fast—a dynamic that could eventually favor a rotation back toward gold.

Platinum: relative value matters

Among the precious metals, platinum has been the standout performer this week, gaining around 17% to fresh record highs. Part of the move reflects an ongoing positive sentiment toward supply-constrained metals more broadly, but relative value has clearly played a role. Platinum has spent much of the past decade trading at historically depressed levels versus gold, despite its scarcity and critical industrial uses.

The platinum-to-gold ratio tells the story succinctly. At one point last year, an ounce of gold could buy roughly 3.5 ounces of platinum. That ratio has now compressed to around 1.82 - still well above the most recent cycle low near 1.4 recorded in 2022, but a meaningful adjustment nonetheless. In that sense, platinum is not “becoming gold”; rather, its relative cheapness, combined with a tight supply outlook, continues to underpin prices. However, investors also need to respect platinum’s comparatively shallow liquidity, which leaves the market vulnerable to sharp and potentially deep corrections. Whether the catch-up has further to run will ultimately depend on the balance between investment inflows and industrial demand, the latter of which may come under pressure at elevated price levels.

Natural gas surges as winter delivers a shock

If precious metals represent the slow-burn structural story, energy provided the week’s acute shock. U.S. natural gas prices surged as forecasts pointed to the largest winter storm of the season sweeping across central and eastern regions of the country. Even after pulling back below USD 5, front-month gas futures remains on track for a weekly gain of more than 60%, a reminder of how violently weather risk can be repriced when conditions align.

The dynamics are two-sided. On the demand side, record-breaking cold has sharply lifted heating needs across densely populated areas. On the supply side, production in southern states faces the risk of freeze-offs, where water solidifies inside pipelines and disrupts flows just as consumption spikes. This combination has left the market acutely sensitive to each incremental weather update.

Importantly, this is not a purely domestic story. The surge in U.S. prices is increasingly linked to conditions in Europe and Asia through liquefied natural gas flows. Competition for LNG cargoes tightens the global balance when cold weather hits multiple regions simultaneously, and this winter has delivered exactly that scenario. European benchmark prices have responded accordingly, with the TTF contract jumping 36% this month as stockpiles within the region have seen withdrawals at the fastest pace in five years.

Distillates have quietly confirmed the broader energy theme. As temperatures plunge, demand for diesel and heating fuels rises—not only for transport and heating, but also as backup generators are switched on to support stressed power grids. The result was seen in London Gasoil futures and not least the New York Ultra-low Sulphur Diesel (ULSD) contracts, supporting refinery margins and crude oil prices. 

Crude oil: geopolitics versus surplus

Crude has held near the upper end of its January USD 60–67 range, supported by winter-related demand signals and a persistent geopolitical risk premium. Tensions ebbed and flowed during the week, with the U.S.–Europe standoff over U.S. ownership of Greenland briefly escalating into a diplomatic storm before cooling after President Donald Trump backed down following meetings at Davos, including discussions with the head of NATO. Elsewhere, the risk of U.S. intervention involving Iran remains elevated, helping to underpin prices amid the possibility of a sudden and material supply disruption.

At the same time, the structural counterweight remains firmly in place. The International Energy Agency continues to flag the risk of a major supply glut emerging in 2026 and beyond, driven by rising non-OPEC+ production and only partly offset by demand growth that, while still robust, is expected to moderate. For now, geopolitics and weather can keep crude supported, but the medium-term narrative remains one of ample supply. These opposing forces help explain why prices have struggled to break decisively higher—or lower. 

Industrial metals: copper cools at the margin

Copper trades broadly flat on the week with the COMEX High Grade futures contract consolidating below USD 6 per pound after recently hitting record highs above, with investor demand offsetting early signs of weakening industrial consumption at these near record-high price levels. The futures curve nevertheless offered a subtle but important signal, with front-month spreads on the London Metal Exchange moving from backwardation into contango, pointing to an easing of near-term tightness.

That shift is consistent with developments on the inventory front. Exchange-monitored stockpiles have been building steadily over the past few months and have now exceeded the previous 2018 peak above 900,000 tons, with increases recorded across all three major exchanges in London, Shanghai, and New York. As a result, while the medium- to long-term demand outlook remains constructive amid structural supply constraints, further price advances ahead of and during China’s Lunar New Year holiday, starting 17 February, are likely to depend increasingly on speculative participation as industrial consumers step back at elevated price levels.

Agriculture: grains steady, cocoa cracks

In agriculture, grains delivered a mixed but relatively stable performance. Soybeans gyrated as traders reassessed signals around Chinese demand, while wheat held above key technical support near USD 5 per bushel. A softer dollar provided some tailwind, and lingering weather concerns in parts of the United States and Argentina offered background support.

Soft commodities told a very different story. Cocoa slumped to a fresh two-year low, extending a downturn that increasingly reflects demand destruction rather than supply relief. After years of elevated prices, consumers are pushing back against expensive chocolate products, and manufacturers are adjusting accordingly.

The corporate evidence is now hard to ignore. Barry Callebaut AG, the world’s largest chocolate manufacturer, reported a 22% drop in cocoa division sales volume, citing “negative market demand” and a strategic shift toward higher-return segments. Producers are still working through inventories of beans purchased at much higher prices, compounding the pressure.

Pulling the threads together

This week’s performance across commodities underscores just how diverse the asset class can be. Hard assets are thriving as investors seek protection from fiscal uncertainty, currency weakness, and geopolitical noise. At the same time, hard weather has delivered a sharp, tangible shock to energy markets, reminding participants that physical constraints still matter deeply in a financialized world. Meanwhile, soft commodities are grappling with the other side of the equation—what happens when high prices finally erode demand.

For investors and traders, the key takeaway is not to chase everything higher indiscriminately, but to remain focused on the underlying drivers while recognising the role commodities can play within a diversified multi-asset portfolio. In metals, relative value and physical tightness continue to matter alongside momentum. In energy, weather premiums can be powerful but fleeting, demanding discipline around curve structure and timing. In agriculture, demand elasticity is reasserting itself after years of supply-led narratives.

Against this backdrop, we maintain our long-held constructive view on commodities as a strategic portfolio component, offering diversification and protection in an environment marked by fiscal uncertainty, geopolitical risk, and supply-side shocks. That said, with the BCOM already delivering a strong return in a short period, bouts of consolidation should be expected and may ultimately offer investors more attractive entry levels.