Geopolitical Risk and Global Commodity Markets: Insights for March 2024

With the end of the first quarter of 2024, commodity markets continued to set up against a multi-factor backdrop. In the US, January's inflation numbers came in above consensus and injected uncertainty into the metals markets. Initially, this had dampened hopes of any near-term rate cut and weighed on near-term pressure on gold prices. However, the view of future rate cuts was enough to bring some upgrades to the consensus price forecasts.

This February, the metals markets again took the cue from the macro-economic front in both the US and China. The US had published the inflation report that the Consumer Price Index increased 3.1% over the same month a year earlier in February. Another influencing factor for sentiments was that in China, the consumer price index tumbled and has seen its sharpest decline in 15 years. These were added to by the financial troubles of Evergrande in furthering this gloom in the economy.

Strategic Outlook and Summary

Global economic indicators, Federal Reserve policies, and geopolitical events are expected to be the leading drivers of market sentiment and commodities prices going forward. Investors are advised to

remain vigilant and perform appropriate risk analysis when making trading decisions.

• Equity and Commodity Markets: Best and Worst Performers
• US Equity Markets: SP500 had an incredible gain buoyed by megacap tech stocks led higher by Nvidia and Microsoft.
• ASX 200 Resources Index: The index was able to advance 2.7% on the back of a positive view for the resources sector.
• Interest Rates: The Federal Reserve left rates unchanged but opened a door to even three rate cuts within 2024.
• US Dollar Strength: The dollar index jumped up 1.4% and is a signal of continuous attraction to the US economy.

Precious and Industrial Metals: Focus

• Gold: The month finished with gold at an all-time nominal high amidst monetary demand and geopolitical risks.
• Silver: For its part, silver's performance was relatively stable due to some industrial demand from the photovoltaic solar and semiconductor industries.
• Copper and Nickel: Copper surged after an agreement by major Chinese smelters to reduce output, while nickel rose on the back of fears about production quotas in Indonesia and expectations for rate cuts in the US.
• Lithium and Iron Ore: Lithium price fell into the red due to surplus inventories in China, while iron ore prices continued their trend of bouncing up and down with changing demand outlooks.
• Uranium: After having consolidated in recent weeks, the price has readjusted upward. The view is extremely positive, underpinned by the supply/demand fundamentals and the reawakened global interest in nuclear power.
• Energy Sector Dynamics: The rebound of the oil market was promoted by the strategies deployed by OPEC; this came in contrast to the maintained geopolitical tensions, while Natural Gas held divergent price behavior.
• LME Lead and Zinc: Zinc rebounded on the back of the tightening supply, while demand for lead remained subdued on account of slower-than-anticipated recovery in the economy.

Chart of the Month - Copper:

This shift to decarbonization underlines the importance of copper, while underinvestment in new copper mines challenges meeting the demand from the energy transition.

This therefore implies that investors in commodity markets, whose ongoing uncertainties are deeply underpinned by global economic vagaries and geopolitical tensions, must be well-informed and agile in being able to seize such opportunities and reduce potential risks.