Source: Zhitong Finance

Wall Street firm J.P. Morgan Commodities Research (JPM Commodities Research) recently released a research report saying that driven by a sharp rise in prices in the international crude oil, refined oil products and metals markets, the value of open positions in the global commodity market increased by about 3.5% (about US$47 billion) on a weekly basis, reaching the highest level since June 2022, with a total value of about 1.39 trillion US dollars.

The bank said in a report published on April 8 that contract-based capital inflows for all types of traders continued for five consecutive weeks, reaching the highest level of 144 billion US dollars in the year, mainly driven by the strengthening of precious and base metal prices and crude oil and refined oil products markets.

The increase in the value of open positions and the trend of capital inflows are generally seen as the market has strong interest in buying these commodities, or an increase in long positions. This trend of capital inflows usually indicates that investors are optimistic about the future price performance of the relevant commodities.

Cumulative traffic for all commodity markets as measured by J.P. Morgan Chase:

Economists on the J.P. Morgan commodities team believe that the strong resilience of the US economic growth and the easing trend in the financial environment have greatly increased the possibility that the Fed will achieve the “soft landing” vision of the US economy by 2025, while America's sticky inflation rate has increased the risk that the Fed will reduce the margin of interest rate cuts compared to the FOMC bitmap. Economists at J.P. Morgan now predict that the Fed's monetary policy easing cycle will begin in July this year, and interest rates are expected to be cut by 75 basis points by the end of the year.

Statistics show that as of April 5, the estimated value of open positions in the global precious metals market increased by about 7% compared to last week, to about US$1940 billion. Gold and silver led up to $3.9 billion in contract-based capital inflows, completely reversing last week's capital outflow trend.

On Monday, the settlement amount of gold futures reached a new high, mainly driven by the purchase of gold by central banks around the world. Analysts generally expect the price of gold to rise further. However, economists at J.P. Morgan Chase stressed that if the price of gold falls below 2,150 US dollars/ounce in the short term, it will begin to trigger exit positions, which in turn will trigger a more drastic correction, which may eventually push the price of gold to 2,050 US dollars/ounce. The spot price of gold continued to hover above $2,350 per ounce on Tuesday.

However, gold, a traditional safe-haven asset, is still J.P. Morgan Chase's preferred investment target in the global commodity market. J.P. Morgan expects the spot price of gold to reach 2,500 US dollars per ounce this year. Analysts at another major Wall Street bank, recently sharply raised the target price of spot gold to 2,400 US dollars/ounce, an increase of nearly 10%.

In terms of copper metal trading, the J.P. Morgan commodities team wrote in the report that due to capital inflows of 3.7 billion US dollars driven by rising international copper prices, the value of open positions in the global basic metals market soared 6.5% on a weekly basis to about 190 billion US dollars.

Analysts at Wall Street firm Goldman Sachs recently pointed out in a research report that copper will have a supply gap of 250,000 tons in the second quarter, a supply gap of 450,000 tons in the second half of 2024, and copper will rise to 10,000 US dollars per ton by the end of the year. Morgan Stanley predicts that by the fourth quarter of 2024, the price of copper may rise to 10,500 US dollars/ton. Currently, the price of LME copper is around 9,400 US dollars.

At the same time, the estimated value of outstanding equity in the entire energy commodities market increased by about $22 billion on a weekly basis, to about $611 billion. This increase was mainly driven by a strong rise in the prices of crude oil and refined oil products. As the tension in the Middle East may escalate into a local war affecting the wider region of the Middle East, Brent crude oil broke through 90 US dollars/barrel for the first time since October last week and is currently stable above 90 US dollars.

Sebastian Barrack, head of commodities at hedge fund Citadel, said on Monday at the Financial Times Commodities Global Summit in Lausanne, Switzerland, that the global oil supply market may be “extremely tight” in the second half of this year. If OPEC+ does not resume more supply, oil prices will rise to a level that will eventually limit demand.

A global research team from Bank of America predicts that the average prices of Brent crude oil and WTI crude oil will be 86 US dollars/barrel and 81 US dollars/barrel respectively this year. The peak of the two will be around 95 US dollars/barrel in summer.

Investment research platform Seeking Alpha said that these commodities-related exchange-traded funds (ETFs) in the US stock market deserve investors' attention. The US stock code is in parentheses.

ETFs closely tied to gold:

SPDR Gold Shares ETF (GLD)

VanEck Gold Miners ETF (GDX)

VanEck Junior Gold Miners ETF (GDXJ)

iShares Gold Trust ETF (IAU)

Direxion Daily Gold Miners Index Bull 2X Shares ETF (NUGT)

Sprott Physical Gold Trust (PHYS)

ETFs linked to other metals:

iShares Silver Trust ETF (SLV)

Sprott Physical Silver Trust (PSLV)

Global X Silver Miners ETF (SIL)

U.S. Copper Index Fund, LP ETF (CPER)

abrdn Physical Palladium Shares ETF (PALL)

ETFs related to crude oil and refined oil products:

U.S. Oil Fund, LP ETF (USO)

Invesco DB Oil Fund ETF (DBO)

U.S. 12 Month Oil Fund, LP ETF (USL)

U.S. Brent Oil Fund, LP ETF (BNO)

U.S. Natural Gas Fund, LP ETF (UNG)

U.S. Gasoline Fund, LP ETF (UGA)

ETFs related to agricultural commodities:

Invesco DB Agriculture Fund ETF (DBA)

Teucrium Soybean ETF (SOYB)

Teucrium Wheat ETF (WEAT)

Teucrium Corn Fund ETF (CORN)

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