It’s not just oil. Copper has reached a 13-month peak and gold another record above $2,300 an ounce.
Copper may have been boosted by China’s moves to promote auto trade-ins and scrap government-set minimum down payments for consumers financing new car purchases. Autos, particularly EVs, are big users of copper.
Gold seems to be benefiting from buying by momentum funds and commodity trading advisors since its clean break of $2,072 resistance.
There’s also a sense that investors are concerned at the mountain of debt global governments are issuing, seeking to put money in assets that are limited in quantity. That may be one reason for the demand revival in cryptocurrencies like bitcoin, which, at least theoretically, are limited in supply.
The ascent of oil, if sustained, could prove a headache for central banks as it adds to inflation pressure while acting as a tax on consumers.
OPEC+ ministers showed no inclination to increase output at their meeting on Wednesday, keeping voluntary cuts of 2.2 million barrels per day in place until at least the end of June.
That would not be welcome to the Federal Reserve given the rise in prices paid reflected in the ISM manufacturing survey this week, although that was thankfully balanced by a drop in prices in the services survey.
Fed Chair Jerome Powell chose not to rock the boat and reaffirmed rate cuts are coming if the data pans out as they expect. No less than seven Fed officials are speaking on Thursday and will no doubt have their own views on rates.
Fed fund futures still favour a June start to cuts at 62%, though that’s down from 74% a month ago. The bigger shift has been in how fast and far rates are expected to fall, with roughly 73 basis points priced in for this year compared to more than 140 basis points in January.
Investors have also taken 100 basis points of easing out of 2025, so that rates are now seen ending next year around 4% rather than 3%. The recent rise in longer-term yields suggests Treasury investors clearly fear the neutral level for U.S. rates is no longer 2.5%, but 3% or higher.
