Commodities Report: June 28 — July 2, 2021

Forecast Date: June 28 — July 2, 2021

The market is almost at the end of the first half of the year, in preparation of the start of the third quarter. Inflation-induced infrastructure spending is now the hallmark of financial market activities.

Last week ended on a high note, culminating with the US president’s announcement of the $1.2 trillion green energy and infrastructure spending plan to transform the US economy — expected to be injected into capital projects such as roads re-construction, railways, airports, cellular network, internet infrastructure and electric cars. In support of green energy, the highlight is to invest $15 billion into electric vehicles and supporting infrastructure and build a national network of 500,000 electrical vehicle-charging station by 2030.

The implication of the all-round infrastructure spending and green energy investments is the consequential high demand for commodities especially, industrial metals, such as lithium, cobalt, nickel, graphite, manganese, palladium, copper and aluminum for the production of batteries. In extension, demand is expected to outgrow supply in the second half of the year adding further bullish trend as we move into the next commodity super cycle, where crawling supply gives way to positively abnormal demand trends.

The biggest moves in commodity prices are seen in Palladium and Copper following the announcement by the US president. The anticipated big market moving events next week are;

a. The release of the Non-Farm payrolls data to gauge the health of the economy

b. The PMI and the CB consumer confidence data.

c. The Basel III agreement which comes into force on June 28 for European banks and the July 1 for US banks.

Gold is now re-classified from a tier 3 asset to a tier 1 asset ((re-rating)) and this could be a determining factor for quarter three price movement, making gold more expensive to buy and sell creating a liquidity squeeze that could generate even more northward movements in prices.

A total of 27 major commodities are currently trading near 5–10-year highs. Brent hit $76 per barrel while WTI crude oil surged above $74 per barrel. Oil process may likely hit $100 per barrel, in the second half of 2021 buoyed by consistent surge in inflation.

Definition of Terms

PMI = United States Manufacturing Purchasing Managers Index

Conference Board (CB) Consumer Confidence

Redfox Analytics and Global Markets. https://www.linkedin.com/in/redfoxanalytics/