Commodity wrap - Oil, Gold, Coffee, Zinc (16.09.2025)

Oil:

• Continued weakness in the US dollar, driven by expectations of interest rate cuts, is supporting a recovery in oil prices and other commodities that are sensitive to dollar movements.
• Market sentiment remains cautious amid speculation over new secondary sanctions targeting Russia, raising fears of a potential reduction in available global supply. The United States has yet to take concrete action, instead pressuring the EU to implement secondary restrictions—measures that would mainly affect China and India, currently the largest buyers of Russian crude.
• Donald Trump has openly criticized NATO member states that persist in purchasing Russian oil, calling attention to the substantial volumes still reaching destinations such as the Netherlands and Turkey.
• Russia has recently announced a suspension of peace talks with Ukraine. In parallel, Ukraine has intensified its attacks on Russian oil infrastructure, including a weekend drone strike on the Kirishi refinery near St Petersburg—one of the country's largest facilities—and attacks against export terminals on the Baltic coast.
• Data from Reuters show that Russia's refinery throughput fell to just 4.98 million barrels per day in early September, the lowest reading in more than three years.
• Trump warns that his “patience” with President Putin is waning, but has so far refrained from decisive action, instead seeking to sway European partners.
• The latest IEA forecasts suggest the oil market could face a supply surplus approaching 3 million barrels per day next year—though these projections are subject to considerable geopolitical uncertainties. In contrast, OPEC anticipates a potential deficit in 2026, highlighting stronger demand from its own membership (“call on OPEC”).

Gold:

• Gold has broken out of multi-day consolidation, reaching new historical highs—trading near $3,700 per ounce as of Tuesday, September 16.
• Price gains have reached 42% so far this year.
• The recent rally has been propelled by anticipation of US rate cuts and mounting long-term uncertainties across key economies including the US, UK, and France, where yield curve steepening has become more pronounced at the long end.
• Markets are fully pricing in a rate cut at the FOMC meeting starting September 16. Expectations for rates will be decisive for the outlook on gold, the dollar, and equities.
• US interest rate futures currently price nearly three rate cuts before year-end, though the trajectory will depend on macro projections and the data flow.
• ANZ expects gold to reach $3,800 per ounce by year-end, UBS projects $4,000 by mid-2026, and Goldman Sachs argues that—under favorable conditions—prices could hit $5,000 next year.
• From a seasonal perspective, 2025 is shaping up to be one of the strongest years on record. Local gold market bottoms are commonly found at the end of September, with sharp rallies in early October—a scenario that may unfold if profit-taking follows the Fed rate decision.
• Central banks have recently stepped up balance-sheet expansion, providing further support for gold prices.
• ETF gold inventories have reached their highest levels since late 2022

Looking at all months in the year, September is one of the worst months of the year for gold. Looking at the last 10 years, we only had increases in 2024 and slight ones in 2026. On the other hand, currently, September is the second-best month this year after March. Source: Bloomberg Finance LP, XTB

Central banks slightly increase their balances, which is a positive factor for gold. Source: Bloomberg Finance LP, XTB

Coffee:

• Coffee futures have surged sharply at the start of the week, with Arabica prices hitting six-month highs.
• The rally is driven by a lack of rainfall in Brazil ahead of the crucial coffee tree flowering period, reducing the outlook for next season’s crop.
• Somar Meteorologia reports zero precipitation in Minas Gerais, the key Arabica region, in the week to September 13.
• The Brazilian real remains strong despite continued high tariffs in the US—a dynamic deterring local farmers from selling abroad.
• US buyers are finding it increasingly difficult to source coffee from alternative regions. Purchasing Brazilian beans involves mark-ups of around 50% compared to other origins, adding broad upward pressure on prices.
• US retail coffee prices soared by more than 20% year-on-year in August, marking the biggest jump since 1997.
• Latest CONAB forecasts indicate that this year's Arabica crop will come in below earlier projections.
• After months of declining speculative longs, there is a marked resurgence in long positions, although shorts are also rising, albeit less aggressively.
• The net speculative long position is now roughly three to one in favour of bulls.
• Coffee prices are now trading above their April peaks and are just 4% shy of all-time highs.

Speculative long positions on coffee are clearly rebounding after months of decrease. Currently, the advantage of speculative long positions over short ones is almost 3 to 1. Source: Bloomberg Finance LP, XTB

Zinc:

• Sixty percent of all zinc is deployed for galvanization, extending the lifespan of steel structures by decades; as a result, zinc remains highly dependent on construction sector dynamics, which have been muted in recent years owing to mixed conditions in China.
• The automotive sector accounts for another major share of zinc demand, but has also faced challenges of late.
• Zinc-air battery manufacturing is growing rapidly: while its share is currently only 1%, it could rise to as much as 30% by 2030.
• Fundamentally, the zinc market is caught between rising production capacity and weakening demand in its key sectors, yet prices have recently come under upward pressure.
• Supply is expected to increase by about 4% in 2025, while demand is set to rise by just 1%, leading to a surplus below 100,000 tonnes—compared to last year’s deficit of more than 160,000 tonnes.
• China leads global refined zinc production. While its overall capacity has grown in recent years, utilization rates have declined from over 90% in 2010 to just above 80% in 2024.
• Recent price support has stemmed from low inventories. LME stocks have dipped below 80,000 tonnes—the lowest point in two years. Moreover, only 45,000 tonnes are immediately deliverable, equivalent to just one day of consumption. Last year, LME inventories stood at 235,000 tonnes.
• The recent rally has been amplified by trading-driven “churn” - mainly in Singapore warehouses. First-half 2025 exports from Singapore match the total for all of 2024, and metal rotation remains high, obscuring the true market balance. LME stocks have been used to fill supply gaps outside China, where surpluses persist.
• Prices are now approaching $3,000 per tonne, though forecasts from the World Bank and Fitch call for a drop to $2,600 this year and $2,500 in 2026.
• Zinc prices have rebounded since April, but on an annual basis remain close to their 2024 closing level. Market trends mirror those in copper and aluminum, and—despite low stocks—the underlying fundamentals point to ample supply, which could lead to future rebalancing. Prices are nearing key resistance at $3,000 per tonne, including a declining trendline and 61.8% retracement of the 2023 bear move.