Global Reversal of Covid-Related Curbs Driving Demand for Commodities

The outlook for commodity prices remain bullish, given the current weakness in the U.S. Dollar, shortages due to the reopening of the global economy and expectations that the Federal Reserve will allow U.S. inflation to exceed mandated levels.

Goldman Sachs Updates Commodities Outlook

Last week, U.S. bank Goldman Sachs said it expects commodities to rally another 13.5% over the next six months on a worldwide reversal of coronavirus curbs, lower interest rates and a weaker dollar.

“We expect the biggest jump in oil demand eve, a 5.2 million barrels per day (bpd) rise over the next six months,” Goldman said, citing accelerations of vaccinations in Europe and an unleashing of pent-up travel demand.

The easing of international travel restrictions in May will lead global jet demand to recover by 1.5 million bpd, it said.

The bank see gold prices at $2,000 an ounce over the next six months and said it is too early for Bitcoin to compete with gold for safe haven demand, adding that the two can co-exist, Reuters reported.

Goldman also upgraded its copper price forecast, setting a 12-month target of $11,000 per tonne, citing an under-invested supply side.

“The only way this record-sized and fast approaching supply crunch can be solved is via a surge in price to new record highs,” the bank said.

While China will maintain its major role in commodity demand, the bank added, it is not expected to be the only major source of growth in the coming decade.

Soaring Lumber Prices Reverberate Through U.S. Housing Market

Skyrocketing lumber prices threaten to thwart the momentum of the U.S. housing market, which for months has been one of the brightest stars of the recovery from the pandemic recession.

Surging demand pushed housing inventories to record lows. Homebuilding got to work, and lumber producers have struggled to catch up, which might take some time. Meanwhile, lumber prices have jumped more than 300% year-on-year to record highs.

With lumber prices sky high and a slim supply of housing stock, median home prices of existing homes jumped by a record-breaking 17.2% last month.

Palladium Tops $3,000 for First Time Amid Undersupply

Palladium rose above $3,000 an ounce for the first time on Friday as the market worried about a shortage of the metal embedded by automakers in exhaust pipes to neutralize emissions.

Demand from the auto industry is rising and expected to climb further as a semiconductor chip shortage that has curtailed production eases later this year.

“Palladium has been in a structural deficit for 10 years. We have seen above ground inventories falling to very low levels,” said UBS analyst Giovanni Staunovo.

For a look at all of today’s economic events, check out our economic calendar.

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James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.