Commerzbank Commodities Radar July 2021
Source: Bloomberg data
Gold and platinum demonstrate a positive outlook after price slump
Gold really took a beating, following the Fed meeting in mid-June. The price plunged by around US Dollar 90 in two trading days, and slid further to US Dollar 1,750 per troy ounce at the end of the month. As a result, all gains made since mid-April were wiped out within two weeks.
At the beginning of June, the price still reached the starting level of the year again, at more than US Dollar 1,900 per troy ounce. After the US inflation rate rose significantly more than expected in the past months, gold benefited from its role as a hedge against inflation In our view, nothing fundamental has changed in the argumentation for a higher gold price: Inflation is well above nominal bond yields, so real interest rates are negative. With most representatives of the US Federal Reserve (Fed) considering this to be a temporary phenomenon, the central bank has not yet seen any need to exit from its ultra-loose monetary policy any time soon. Bond purchases are to remain unchanged for the time being, which will lead to a further increase in the balance sheet and in money supply. A narrow majority of Fed members expects first interest rate hikes only in 2023. However, it will probably take some time for the market to digest the shock of the sudden and unexpected price drop. In our opinion, the path that gold will take in the coming weeks, will depend heavily on the behaviour of ETF investors. If they are spooked and sell their holdings, gold is likely to fall further. If, on the other hand, ETF investors see the lower price level as a buying opportunity, the price should stabilise and rise again in a few weeks. We are sticking to our year-end forecast of US Dollar 2,000 for the time being. However, the downside risk to this forecast has increased.
In contrast to gold, platinum already shifted into reverse gear in May. It fell in June well below US Dollar 1,100 per troy ounce, reaching at times its lowest level since January. This weaker price development can also most likely be attributed to the current limited demand from the automotive industry, which is a consequence in itself of the chip shortage.
Moreover, Johnson Matthey is forecasting a higher than expected supply surplus – amounting to more than 600,000 ounces for this year. This would almost offset the supply deficit seen in 2020. Whilst the World Platinum Investment Council (WPIC) expects a supply deficit of 158,000 ounces this year, this would be significantly lower than the record supply deficit in the previous year.
Despite the recent period of weakness, we continue to see the upside for platinum,. In particular, the demand outlook for the automotive industry is still positive. This is down to three factors:
- Automotive production should rise again, after the COVID-19-related downturn in the past year, and the current losses due to chip shortages.
- Platinum loadings for catalytic converters are increasing due to stricter emission rules in Europe and China.
- Automotive OEMs are expected to increasingly substitute the far more expensive palladium with platinum. In addition to its use in catalytic converters for internal combustion engines, platinum is also used in hydrogen technology (fuel cells). Whilst this technology does not yet play a major role, it should gradually gain importance over the next few years. We expect the platinum price to reach US Dollar 1,300 per troy ounce by the end of this year.
Source: Commerzbank Research, as of: 30.06.2021
| in EUR per unit | in EUR per unit | ||||
| Precious metals | Agricultural products | ||||
| Gold per troy ounce |
High Low |
1,736.99 1,415.30 |
Cocoa per mt |
High Low |
2,282.36 1,605.39 |
| Palladium per troy ounce |
High Low |
2,483.71 1,698.66 |
Cotton per pound |
High Low |
0.76 0.52 |
| Platinum per troy ounce |
High Low |
1,076.02 721.18 |
Maize per mt |
High Low |
269.75 163.50 |
| Silver per troy ounce |
High Low |
24.78 15.99 |
Rapeseed per mt |
High Low |
681.25 373.50 |
| Sugar per pound |
High Low |
0.15 0.10 |
|||
| Wheat per mt |
High Low |
257.75 177.00 |
|||
| Industrial metals | Energy | ||||
| Aluminium per mt |
High Low |
2,133.49 1,407.89 |
Brent Crude Oil per barrel |
High Low |
63.82 32.17 |
|
Copper per mt |
High Low |
8,646.82 5,300.41 |
Coal per mt |
High Low |
101.91 41.21 |
| Iron Ore per mt |
High Low |
185.60 87.27 |
Diesel per mt |
High Low |
507.87 259.75 |
| Lead per mt |
High Low |
1,962.42 1,472.60 |
Electricity per MWh |
High Low |
85.22 29.99 |
| Nickel per mt |
High Low |
16,192.55 11,310.57 |
EUA per tonne |
High Low |
56.65 23.21 |
| Tin per mt |
High Low |
28,070.54 14,582.07 |
Gasoil per mt |
High Low |
508.55 260.77 |
| Zinc per mt |
High Low |
2,506.55 1,792.39 |
Jet Fuel per mt |
High Low |
527.77 248.78 |
* Source: Bloomberg data, period: 01/07/2020 - 30/06/2021
** From the perspective of German companies, the listed commodities are generally priced in a foreign currency. For this reason, currency risks need to be considered in addition to commodity price risks.
