In this analysis we are focusing on the most recent developments across major commodities:
Oil
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Stronger dollar along with tumbling EM currencies push oil prices lower
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India may halved its imports from Iran once it finds cheaper oil elsewhere
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Iran does not plan new nuclear negotiations with the US
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Stocks have begun rising earlier than implied by seasonal patterns, oil prices are falling quicker than the heaviest declines in the past 5 years
Oil inventories have begun building earlier than implied by seasonal patterns. Is this something to worry about for bulls? Source: Bloomberg, XTB Research
Oil prices are breaking through a 50% retracement of the entire meaningful bearish wave. Prices are also trading below their medium-term trend line being a strong support for buyers. Trying to set a theoretical target for bears one may point to $55. Source: xStation5
Gold
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Weakish physical demand (strong rises of gold denominated in Indian rupee and Chinese renminbi, seasonality related to monsoons)
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Seasonal patterns point to a bounce at the turn of the third quarter
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Remarkably weak investment demand - ETF have shed gold recently
Demand for gold from major sources were poor in the first three months of the year. Source: WGC, XTB Research
Gold prices broke through their crucial trend line. They are testing the lows from 2013 and 2014 along with a 61.8% retracement. These levels are pivotal to retain the long-term upward pressure on prices. In turn, the last resort for bulls might be localized in the vicinity of $1125. Source: xStation5
Coffee
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There have been no changes in the market lately
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Speculative investors have piled up their positions
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Small speculators have become overbought, the theme experienced in April this year where we saw a small uptick in prices
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Brazilian real remains weak in connection with political uncertainty
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The political landscape could settle down after elections scheduled for October
Small speculators have strongly built their longs recently which could be seen as a contrarian signal at the time when the largest funds keep a huge bearish exposure. Source: cotbase.com
Coffee prices continue moving south. Given the chart above one may count of a decline toward 100-103c per pound. Any bounce could be on the cards this fall though. Source: xStation5
Wheat
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A successful crop of spring wheat in the US (35% of total spring wheat has been already harvested compared to 28% in the prior year)
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Spring wheat features high quality unlike winter wheat
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Saudi Arabia halts imports of Canadian wheat leading to increased supply
Weekly data suggest spring wheat conditions remain well above their 5-year average. Source: farmlead.com
After the period of massive gains wheat may come back to seasonal falls. Source: Bloomberg, XTB Research
