Commodities weekly: metals and softs rise in August as energy and grains slide

Mid East Info

a day ago

Ole Hansen, Head of Commodity Strategy, Saxo Bank
Macro overview
August has so far been shaped by a tug-of-war between supportive supply-side stories in parts of the commodity market and macro headwinds from weakening economic data in the US and around the world. The latest US inflation data, in the form of a hotter-than-expected July PPI, forced markets to recalibrate their Fed expectations. Just a day after Scott Bessent, the Secretary of the Treasury, called for an aggressive 150 bp rate cut, the data cooled talk of a jumbo move in September, with the market now firmly pricing in a modest 25 bp reduction.
US 10-year Treasury yields nevertheless have edged lower during the month, with the 2-year tenor falling the most amid the mentioned prospect of incoming rate cuts and expectations the next chair of the Federal Reserve replacing Jerome Powell early next year will be much more inclined to argue for the cuts so desperately sought by President Trump and Bessent. Following a brief period of strength last month, the US dollar has resumed its broad decline with notable weakness seen against its major peers, led by GBP, JPY, and EUR.
This combination—lower yields and renewed dollar weakness—has so far this month helped underpin non-yielding investment assets such as metals; however, with silver, platinum, and copper seeing most of the demand as gold remains well and truly stuck midrange waiting for the next catalyst.
Overall, from a position of recent strength, US economic data has started to show signs of weakness, joining other economies with global PMIs pointing to slowing momentum in parts of Europe and Asia. Friday's data dump from China showed an across-the-board slowing economy in July, suggesting an impact from Beijing's crackdown to curb overcapacity in businesses from steel to solar and EVs, extreme weather, and spillovers from Donald Trump's tariffs. The oil market remains fixated on the interplay between demand downgrades and OPEC+ supply policy, while in agriculture, the latest WASDE report triggered sharp moves in the grains complex. Soft commodities, led by coffee, have been the standout winners thanks to idiosyncratic weather and policy drivers.
Commodity sector snapshot
The Bloomberg Commodity Total Return Index is down around 1% month-to-date, reducing the year-to-date gain to just 4%, with strength in softs, industrial metals, and precious metals offset by losses in grains and, most notably, the energy sector.
Softs have outperformed on weather concerns, low exchange inventories, and policy uncertainty in key producing nations. Industrial metals have been supported by fading tariff concerns and a copper supply disruption in Chile, while an environmental disaster at a China-owned mine in Zambia underscores the challenges of securing the minerals needed to meet rising power demand, with copper as the key conductor. Precious metals, as mentioned, have seen silver and platinum outshone rangebound gold, not least due to their industrial linkage and a tightening supply outlook.
On the downside, grains, led by corn and wheat, came under pressure from the USDA's projection of a record US corn crop, while energy suffered from a combination of downgraded demand growth, rising inventories, and OPEC+ continued unwinding of production cuts into what could become an oversupplied market.
Energy: rising supply and macroeconomic headwinds
Crude oil prices have struggled in August, with Brent and WTI both down more than 7% and trading near two-month lows. The International Energy Agency's latest report cut its demand growth forecast for 2024, citing weaker industrial activity and slower transport fuel consumption. At the same time, OPEC+ has reaffirmed plans to fully unwind its voluntary production cuts by September, bringing barrels back into a market that has started to show signs of a surplus.
However, it is worth noting that only a relatively small part of the 2.5 million barrel increase that the eight OPEC+ members have agreed to has so far been delivered. Partly due to restraint from producers that exceeded their quotas in recent months, while some producers have struggled to increase output, and finally due to strong summer demand among producers reducing what was available for exports. In addition, prices have held up relatively well due to concerns about secondary sanctions on Russian supply and Chinese stockpiling, which according to the IEA, built by around 900,000 barrels per day in the second quarter.
US and OECD commercial inventories have risen, refining runs are seasonally high, and product cracks—especially diesel—have softened. With backwardation narrowing, the market is signalling less concern over near-term supply tightness. The geopolitical risk premium tied to the Trump–Putin meeting in Alaska is now a secondary driver, and unless talks break down sharply, the macro drag from the demand outlook may keep a lid on rallies, with Brent potentially struggling above USD 70 per barrel.
Notoriously volatile US natural gas is one of the weakest performers this month, down more than 8%. Storage injections continue to outpace the five-year average, leaving inventories 6.6% above normal levels for this time of year. Without a significant late-summer heatwave or major hurricane disruption to Gulf Coast production, the ample storage cushion will limit upside, though weather-driven volatility could reassert itself quickly.
Precious metals: silver outshines gold
Gold initially traded lower after a stronger-than-expected US PPI print, on speculation it may dampen rate cut expectations by pointing to a potential upside in July's Core PCE inflation, likely keeping the Fed cautious. Rising producer input costs risk either squeezing company margins or being passed through to consumers, adding upward pressure on CPI. However, the data does not change our long-held bullish view on gold, as the FOMC will ultimately have to balance inflation control with economic support.
For now, however, gold remains well and truly stuck in a USD 200 range centred around USD 3,350. Still, underlying ETF demand remains firm, rising to a two-year high at 2,878 tons (Bloomberg), suggesting that the market's longer-term bullish narrative—built around eventual Fed easing and lingering stagflation risks—is intact. The near-term focus will be on the July Core PCE release and its implications for September's FOMC meeting, and also the annual gathering of central bankers at Jackson Hole from 21–23 August.
Silver has outperformed gold this month, up close to 4%, aided by its dual role as a precious and industrial metal. Stronger industrial demand expectations, and the prospect for a tightening supply outlook, combined with technical buying as the gold–silver ratio drifts towards last month's low near 86, have supported prices. The market remains sensitive to shifts in global manufacturing data and the USD path, but silver retains more upside beta than gold in a softening dollar environment. From a technical perspective, USD 35 remains with sustained break above USD 38.50 needed before the attention turns to the psychological level at USD 40.
Industrial metals: policy noise fades, fundamentals regain focus
Copper has steadied after July's tariff turmoil, which saw US prices slump relative to London as traders reacted to the prospect of tariffs on key forms of imported refined metal. Clarifications and partial exemptions have helped narrow the Comex–LME spread, shifting attention back to fundamentals. China's latest trade data hinted at some stabilisation in imports, while mine supply issues in South America remain on the radar.
Grains: WASDE reshapes the landscape
The USDA's August WASDE report jolted the grains market. Corn futures dropped sharply to contract lows after the agency projected a record 16.7 billion bushel harvest, driven by expanded planted acreage and favourable summer weather. Higher ending stocks forecasts reinforced the bearish tone, and the futures curve has shifted to a more comfortable carry structure, which inadvertently supports speculators already holding an elevated net short position.
Soybeans moved in the opposite direction, supported by a smaller-than-expected crop estimate and tighter balance sheet. While gains have been modest compared with the sell-off in corn, the market is holding a risk premium into the South American planting season, where early weather developments will be key. In addition, ongoing trade talks with China remain on the radar, not least after President Trump urged China to quadruple their purchase of US-produced beans.
Wheat followed corn lower, also hitting a contract low, with ample global supplies—particularly from the Black Sea and Europe—keeping export competition intense. Quality concerns in parts of Europe have provided some localised support, but not enough to offset the overall bearish supply picture, which in the short term could lead to lower supply as farmers, frustrated with low prices, hold back supplies.
Softs: coffee takes the crown
Arabica coffee is the clear standout in August, rallying more than 10% month-to-date. The move has been driven by a combination of Brazilian weather concerns, low certified exchange stocks, and some tariff-related uncertainty adding to speculative interest. The market remains sensitive to shifts in Brazil's weather outlook and export pace.
Sugar has also posted modest gains, underpinned by policy uncertainty in India, where decisions on export quotas could tighten global supply. Output from Brazil's Centre-South region has been robust, but the balance between strong production and export restrictions elsewhere is keeping prices supported.