Five Key Charts to Watch in Global Commodities This Week
(Bloomberg) -- Gold is testing new highs as investors await signals on the timing of Federal Reserve rate cuts. Coffee is surging, and oil’s once dramatic price swings are dissipating to levels last seen in 2015.
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Here are five notable charts to consider in global commodity markets as the week gets underway.
Coffee
Futures for the premium arabica bean favored by coffee shops like Starbucks Corp. are hanging near 2022’s highs, thanks to shortages of the cheaper robusta bean. Those shortages have pushed up demand for arabica, with prices climbing more than 30% this year. But now, concerns are emerging too over Brazil’s arabica output as dry weather late last year hurt crop development, leading to smaller beans. Robusta, which is used in instant coffee drinks, is also at its highest price in data available since 2008. Arabica fell in New York Monday while robusta rose in London.
Palm Oil
Palm oil stockpiles in Malaysia are building up as exports from the No.2 global producer slumped last month, pressuring prices of the world’s most-consumed edible oil. Inventories advanced 4.4% in June from a month earlier and are at the highest level since February. Futures traded in Kuala Lumpur suffered their worst weekly loss since mid-April last week on concerns of swelling stockpiles as well as competition from ample supplies of soybean oil coming from South America and the US. Palm oil extended declines Monday.
Gold
Gold has been flirting with a new record as investors ramp up bets that cooling inflation will finally usher in a pivot to lower US interest rates. Spot gold came within striking distance of May’s all-time high of $2,450.07 an ounce last week, edging higher when economic data supported speculation that the Fed may soon push ahead with rate cuts. Lower rates tend to favor non-interest bearing gold. Bullion’s 16% gain this year has also been aided by strong central-bank buying and a surge in investor interest, particularly in China, as well as haven demand amid rising geopolitical tensions. Gold edged higher Monday.
Oil
A gauge of oil market volatility at its lowest level since June 2015, with persistent geopolitical risks across the globe countered by concerns that economic growth may falter. Brent crude futures — the international benchmark — have swung in about a $15-a-barrel band since February. As the perception grows that prices are less likely to stage a big rally or selloff, demand for options protection has shrunk. Brent’s second-month implied volatility — a key marker for options pricing that in part reflects expectations of price swings — fell to a nine-year low last week. Oil swung between gains and losses Monday.
LNG
US President Joe Biden’s freeze on new LNG permits has had a chilling impact on US LNG dealmaking, compared with the surge in long-term deals that followed Russia’s invasion of Ukraine in early 2022. Building LNG export projects requires billions of dollars in investments and for nearly all developers, hinge upon securing these contracts to attract financing. The US is the world’s top exporter of LNG, so how many projects get built that allow American exports to be shipped to key markets in Europe and Asia will hinge on political will — and the outcome of November’s US election.
--With assistance from Anuradha Raghu and Doug Alexander.
(Adds Monday prices for coffee, palm oil, gold and oil from second paragraph.)
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