Commodities are rising again on China’s accelerated reopening and hope for an imminent monetary turnaround

This performance was helped by China’s reopening, signs of stabilizing inflation (allowing central banks to ease aggressive monetary policy) and better-than-expected continued global growth. The continued depreciation of the US dollar also helped ease pressure on commodities. However, it should be noted that economists have never been more pessimistic about the American economy, as evidenced by a survey of professional clients by the Federal Reserve Bank of Philadelphia (Philadelphia Fed) since 1969. real estate, along with a deep inversion of the yield curve, is a warning that the world’s largest economy will face a recession in 2023. The depth of the recession will depend on the continued strength of the labor market. So far, the risks are more towards a soft recession than a deep and prolonged economic recession.

Precious metals posted the strongest gains among commodities (+4.7% last month), while gold was the biggest gainer, up 5.8% for the month. 2022 macro headwinds for gold (tight monetary policy, strong US dollar, rising US Treasury yields) turn favorable for the precious metal (weakening US dollar, bounce in US inflation paves the way for accommodative US monetary policy and lower US) . Treasury yields), we believe that the current rally in gold may still continue. Most Federal Reserve speakers took a slightly less belligerent tone, referring more to a rate cut to 0.25%, and Fed Vice Chair Mrs. Fed Vice Chair Ms. sent. slows down.

Industrial metals rose 3.7% last month, extending a six-month rally that now stands at 22%. It remains to be seen whether and how much China’s manufacturing activity will improve in the coming months, but the easing of containment measures should get things moving in the right direction. This year, we continue to be bullish on the impact of the energy transition on industrial metals. Last year’s US Deflation Act was considered by many to be monumental because it meant that the energy transition became synonymous with energy independence. The shift from fossil fuels to green technologies bodes well for the outlook for demand for industrial metals.

Agricultural goods rose 1.4% last month, supported by grain. The underlying outlook for corn and soybeans improved for the year, while commodities were “sweet.” Of these, except for cocoa and cotton, yields were higher over the past month as supplies were tighter than expected.

The energy was left behind. While U.S. natural gas prices fell 51%, Brent and WTI crude prices rallied over the past month, but it’s been a torturous path.

All of the gains made by Brent and WTI crude oil prices between mid-December and late December were lost in the first week of 2023, but regained in the second week of the year. Brent and WTI prices rose by almost 6% in the month under review. OPEC’s latest demand forecast remains cautious, although China’s reopening will boost demand. This could indicate that the consortium is preparing to limit supply by making further cuts.

The reason for the sharp drop in the price of natural gas is the abnormally warm winter in both the United States and Europe. Europe has made a conscious effort to replenish its reserves and reduce energy demand over the winter, with the European Union agreeing to cut gas demand by 15% between August 2022 and March 2023.

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