Bronze, silver and gold – in less than two months, these three metals will be the centre of attention right across the world. We’re talking, of course, of the Olympic Games in Paris, which will be held from 26 July to 11 August. A total of 5,084 medals will be awarded over these 17 days. The metal trio have been highly rated on commodities exchanges for some considerable time already – in the truest sense of the word. Just last week, for instance, gold hit a fresh record high, marking a climb of more than 17% since the start of the year. Little brother silver managed to rise almost twice as fast over the same period and is now more expensive than it has been since the start of 2013. It is not only the precious metals that are enjoying high demand, though: industrial metals are glittering alongside gold and silver. This is true for copper, among others, the price of which has jumped by more than a quarter this year to reach new highs. That is a rather unusual development, because while copper, a raw material for industry, reflects the outlook for the economy, gold tends to be an indicator of the general mood, hence its “safe haven” status.
The current metal rally is driven primarily by hopes around rate cuts and China. An imminent cut in base rates would play into the hands of gold, with a low interest rate regarded as positive for precious metals because they do not generate ongoing income and would therefore become more competitive against other assets again. Furthermore, falling interest rates boost the economy, which in turn benefits industrial metals. A certain amount of economic optimism is also spreading with regard to China. Following the latest government measures to combat the property crisis in the Middle Kingdom, the people's republic may have passed its nadir. There is also high physical demand for gold: according to figures from the World Gold Council, global demand, including that of central banks, climbed 3% to 1,238 tonnes between January and March compared with the same period the previous year. That makes it the strongest first quarter since 2016.
Meanwhile, there are fears on the oil market that it will take longer than expected for the Fed to lower interest rates. Higher credit costs could slow down economic growth and put pressure on demand for the black gold. The markets for physical crude oil have also softened lately. Just recently, for instance, the International Energy Agency (IEA) lowered its forecast for the growth in oil demand this year by 0.14 to 1.1 million barrels per day, with the weakness of industry and a mild winter in particular cited as having had a dampening effect on consumption in Europe. The IEA experts are standing by their forecast for 2025 and anticipate that the pace of growth will tick higher to 1.2 million barrels per day. Given that demand is still modest, though, further cuts in output could come onto the agenda pretty soon. These are already being discussed on the market ahead of the next OPEC meeting on 4 June.
Agricultural commodities have recently seen an explosion in prices, the price of a tonne of cocoa, for instance, tripling at its peak this year. This can be attributed to crop failures caused by periods of drought alternating with heavy rain in the main growing regions of the Ivory Coast and Ghana. Coffee also suffered weather-related supply bottlenecks recently, which is in turn being reflected in higher prices, with the beans having got about a third more expensive since New Year. Meanwhile, other soft commodities such as wheat and soya are slowly showing signs of recovery. Following a sharp slump at the start of the year, the first of these cereal crops has now made it back into profit. One of the reasons for this was a cold snap in Russia at the start of May, which destroyed the crop and hence reduced yields. Although the curve for soya beans is now pointing upwards again on the back of poorer harvest forecasts, including from Brazil, the price on the stock exchange is still around 5% lower than it was at the end of 2023.