In this week’s commodity wrap we present you 4 markets that look interesting or/and have posted some major price moves: Coffee, Oil, Copper and Silver
COFFEE
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Open real account TRY DEMO Download mobile app Download mobile app- Coffee prices keep tumbling, drop below $1 per pound
- BRL weakness and even higher estimates of this year’s harvest in Brazil behind those declines
- Lula da Silva is banned from elections, his protégé is gaining traction
- Bolsonaro who is seen as relatively market friendly leads in 1st round polls but is tied with leftists Haddad in the 2nd round.
- USDBRL still close to 4.20 highs, Bolsonaro win would be seen as positive for the BRL
- Election date (October 7, run-off 3 weeks later) crucial for USDBRL, Coffee and Sugar prices
A support for Lula (black line) is irrelevant now that he is banned from elections. The two names that count are Bolsonaro (light green) and Haddad (purple). Markets would prefer Bolsonaro. Source: Wikipedia
OIL
- The OPEC increases output, could halt price increases
- Output shortages possible in Iran (sanctions), Venezuela (economic crisis) and Libya. Unease in southern Iraq an upside risk for prices
- Saudis hold talks with Russia, a long-term deal could be supportive for prices
- Depressed WTI prices (OIL.WTI) increase demand, possible price convergence with Brent (OIL)
A wide Brent/WTI spread may not hold as exports of the US oil increases. Source: Bloomberg
COPPER
- Copper prices recover above $6000 as US dollar backs off
- Investors still hope for a trade deal with China
- A full blown escalation of conflict could trim the Chinese growth by at least 1.5pp with negative consequences for copper demand
- We see a major decline in credit impulse which historically preceded declines in Copper prices
- Having said that a lower level of inventories could cushion these declines
A withdrawal of credit impulse is negative for copper prices. Source: XTB Research
A decline of inventories, especially in London, could limit price damage going forward. Source: XTB Research, Bloomberg
SILVER
- Silver prices remain subdued even compared to Gold or Platinum
- CFTC speculative positioning is extremely low, a short squeeze remains a possibility
- A rise in copper prices could help silver as well
- We can see an increased interest in Silver ETFs that could support prices over a longer term
Silver prices remain depressed, does a pick up on gold herald a recovery? Source: xStation5
Increased demand from ETFs could bolster silver prices. Source: Bloomberg
Silver speculative positioning is at the all-time low, that could herald a price recovery. Source: Bloomberg
