Commodity wrap - Silver, gold, oil, corn (8/25/20)

• Silver is halfway to historic heights and is currently consolidating arond the $26-27 per ounce area
• The historical comparison shows that this is not the end of the gains, although a potential overvaluation can be seen in the short term
• ETFs generated a demand for silver of 280 million ounces this year. The forecast of the entire investment demand for this year showed 150-200 million ounces, including 120 million from ETFs. One can see how strong the increase in demand is this year
• The gold-to-silver price ratio almost matched the 10-year average. However bullish periods in the precious metals market, indicate that the price ratio should fall below the long-term average of 60 points

When analyzing the largest price pullbacks from the previous and current crisis, it can be seen that the current rebound is much faster and stronger. On the other hand, looking at the local lows from these periods, it can be seen that the price may continue to increase, although the current gains may have been a bit too strong. Source: Bloomberg, XTB

The gold-silver price ratio has adjusted to the 10-year average, but on the other hand, bullish periods in the precious metals market show a decline below the long-term 60-point average. Source: Bloomberg

Gold:

• In the short term, yields do not allow for a rebound
• Short-term risk reversal indicators suggest further downward pressure. On a 3-month basis, there is no expectation of price changes on the market
• Positioning is not overbought. However, one can see a significant increase in short positions

The significant rebound of short positions means that gold is not overbought in terms of speculation. ETFs have stopped buying gold recently (red line), which is related to the recent decline in prices. Source: Bloomberg

Risk reverse indicators in the short term indicate possible further downward pressure. In the longer term, no price changes are expected. Source: Bloomberg

Oil:

• Consolidation continues - $43 on WTI and $45 on Brent
• Demand for WTI activates around USD 41.5 per barrel, close to the 200-period moving average
• Recently, the amount of products delivered to the market has significantly decreased, which is interesting with a simultaneous decline in crude oil inventories
• Hurricanes can stop a large number of refineries on the coast, production at risk of 1-1.6 million barrels per day (Gulf of Mexico)
• The possible impact of hurricanes may be seen in the data to be released in the following weeks

The number of delivered products has dropped significantly, looking at the publication from last week. Theoretically, this may indicate a lower demand, although at the same time crude oil stocks have decreased. Source: Bloomberg

Corn:

• Significant drop in the quality of corn in the United States. The quality drops below the 5-year average
• Price continues to rebound, still very large divergence with soybean prices
• Corn is after its season low, theoretically, the period of increases is coming. Additionally, positioning rebounces from extreme lows

The quality of the US corn crop fell significantly last week and is below the 5-year average. Source: Bloomberg

The price rebounded after the seasonal low. Theoretically, there is a period of longer growth ahead of us. In addition, positioning bounced off the extreme lows. Source: xStation5