Bi-weekly Commodity Insight
The 33rd Olympic Games are now underway, this time organised in the French capital, Paris. Thousands of athletes from all corners of the world will spend three weeks showcasing their athletic excellence with the dream of reaching the top of the podium. In this week's edition, we take a deeper look at the gold, silver and bronze metals which make up the Olympic medals.
An alloy worthy of third prize
Bronze is an alloy made of copper and tin, usually with an 88%/12% split of the metals. Bronze has a long history dating back to the 3rd century BC and has its own period named after it. The bronze medal, however, is a more modern invention, with the first one awarded during the St Louis Olympics in 1094.
The red metal copper has had a volatile 2024, reaching a high on May 20th after a strong rally to USD 10 915/tonne, before falling back below USD 9 000/tonne on August 25th - a drop of over 18%. What has caused these volatile movements? The outlook for copper started 2024 strongly, with expectations of increased demand for the metal in AI and electrical applications. Copper warehouse stocks also looked to be declining. After a weakened outlook for the Chinese economy and growing inventories in August, copper fell sharply. Important factors to keep an eye on going forward are Chinese GDP data and the development of copper warehouse stocks.
Tin's performance is largely similar to that of copper, with a strong rise in the first half of 2024 before reversing. Tin is a metal used extensively in the soldering of electronics. Like copper, the metal is affected by the outlook for the electronics sector, which is dominated by China. The weak macro figures from China have not helped the metal's price performance either.
On the weekly five-year chart, tin is trading above both the 50 and 200 moving average (MA), an upward trend. Since April 2024, the metal has been trading within a range of USD 30,000 - 36,000/tonne. A breakout from this range could possibly show the way ahead.
Like tin, copper is trading above the MA 50 and 200 over the same time period and range. Note, however, that copper's trend is slightly stronger than tin's, with a higher positive derivative on the trend lines.
Second prize - still a winner
A silver medal is awarded to the athlete who finishes second in their event. Second place can often feel tough and is sometimes referred to as the ‘first loser’. However, silver is a relative winner in 2024 as it has outperformed the gold price. As of 25 July, the silver price is up 15.9% over the year, compared to gold's 14.1%. One explanation for the relative outperformance is silver's electrical conductivity and its potential use in the power-hungry AI field. Another explanation is its structural shortage, where demand has long exceeded supply of newly mined silver and is expected to do so in 2024 as well, according to the Silver Institute.
Silver prices have performed strongly in 2024, and over a five-year horizon on a weekly basis, gold is trading above the MA 50 and 200, both of which are trending upwards. Silver has fallen slightly since its peak this year at USD 31/oz, largely because of the general cooling of the AI sector. An important factor is how interest in the AI sector develops going forward, as well as the supply of mined silver.
An athlete's greatest dream
For the winner, a gold medal awaits at the top of the podium. Humans have loved the shiny metal since time immemorial. Gold is associated with status and success, making it the perfect metal for a winner. However, people not only associate the metal with status and success, but also with financial stability and security.
The 2020s have started with a perfect storm for gold. The past five years have seen a pandemic, historically high inflation, wars and, most recently, the failed execution of a presidential candidate. There are clearly many factors that have made gold perform so strongly. A pessimistic person who believes in continued gloomy times ahead with escalated conflicts should probably not ignore the safe haven aspects of gold. Important events that could affect the gold price in the future are the US presidential election in the autumn, as well as inflation and interest rate developments in the US in the coming months. A messy presidential election could possibly push the gold price further, as could unexpected higher inflation or lower interest rates.
Gold is trading in a strong five-year uptrend. Gold is trading above the MA 50 and 200, both of which are tilting upwards strongly. The gold price is trading at all-time highs, and a breakout to the upside could possibly lead to further gains. Strength often leads to more strength.
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