Horizon Q3│2024 - Commodities

Oil with a tailwind over the summer

Crude oil (Brent) fell below the USD 80 mark temporarily again in early June. Despite new escalations in the Israeli war, the risk premium was steadily priced out again. In addition, the lax adherence to production cuts by some OPEC+ members led to a slight supply surplus and thus to rising oil inventories. This is likely to change in the short term as the US driving season gets underway over the summer, supported by strong holiday sentiment (almost 60% of US consumers are planning at least one trip this summer). In the medium term, however, oil is likely to have a tougher time. Although OPEC+ has extended its cuts until 2025, the small print suggests that these cuts are on the decline and that OPEC+ members intend to put more barrels on the market from October and to increase production significantly next year.

Currencies Commodities EN 1 — Time period: 01/01/2019-09/06/2024

Gold with structural potential despite strong momentum

In the second quarter, gold prices built on the strength seen since the beginning of the year, reaching new highs. However, traditional drivers of the gold price were not responsible for the strong momentum. Real interest rates, the US dollar and rate expectations all rose in the second quarter. Despite this, gold climbed to new highs in tandem with equity markets. The main drivers of price strength have come from the emerging markets. Some central banks are continuously building up their gold reserves as part of a certain move away from the US dollar, above all the Chinese central bank. Private investors, particularly in China, are also increasingly favouring gold as the investment universe shrinks and liquidity increases. The new demand drivers are likely to be structural in nature, given the heightened geopolitical risks this decade. In addition, a turnaround in Western interest rate policy and rising ETF holdings should provide upward momentum. In a portfolio context, gold is therefore attractive over the medium term due to its diversification and tangible asset characteristics.

Currencies Commodities EN 2 — Time period: 01/01/2010-30/04/2024

Metals look attractive long term after consolidating

The LME industrial metal index rose sharply over the second quarter with a performance of almost 8%. Rising industrial activity in the West and in China, sanctions against Russian metal exports and technicals drove metals higher. In the short term, consolidation is likely to continue after the strength, partly because positioning is still elevated. The energy transition and digitalisation will provide long-term support.

Currencies Commodities EN 3 — Time period: 01/01/2021-31/12/2027, e = annual estimates

Author

Philina Kuhzarani

Analyst Multi Asset Strategy & Research

Phone +49 69 91 30 90-533

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Date: 21 June 2024