We are starting a new section on commodities which will be a monthly round up of how various commodities are performing, future trends & price outlook. We look at open interest movements across commodities, net investor positioning across commodities, which commodities show backwardation & contango, which commodities show rich volatility premia, CFTC positioning, which commodities show strong momentum etc. Then we look at individual commodities expected price trends. For crude we believe physical demand supply equation means sub 60 levels by end CY25. Based upon current global and OECD inventories, we can even see sub 50 levels by mid CY26. In gold we believe price movement can be summarised as: conviction purchases + opportunistic purchases = sales of existing stock + mining supply. We believe our ratio of net conviction purchases/mining supply is indicating now a intermediate correction in Gold prices. ETFs and speculative hands selling is reducing the net conviction purchases. We are looking for sub-3000-dollar price target with stop loss at 3460 levels. CMP is 3385. In base metails, we estimate a large boost to industrial metals demand from rising EU defence spending. Historical data suggest that defence currently accounts for 2-3% of global copper, aluminium, steel, and zinc demand and 7% of nickel demand. Euro area military spending is expected to rise from 1.9% in 2024 to 2.7% of GDP by 2027, with a large share of this rise to be spent on metals-intensive equipment. We estimate this would translate into cumulative demand boosts by 2027 of 6% for European industrial metals, and globally of 0.4% for steel, 0.9% for copper, and 1.3% for nickel. In summary, we remain bearish on oil for demand supply reasons, bearish on Gold for reducing net conviction purchases flows & bullish on base metals due to expected increase in European defence spending. As Fed embarks on the 125-bps rate cycle by end Q1CY26 as we envisage, we see dollar lower leading to slight support for base metals and crude but not so much for Gold. We see brent sub 60 by end CY25, Gold sub 3k by Q1CY26 and Copper at 480-490 levels by Q1CY26.
