Outlook of Commodities in the Third Quarter


Commodities had a rough third quarter. This was mostly because the third quarter saw the trade escalations rise. The US and China imposed tariffs worth more than $267 billion. It was also a quarter that saw the US president start a spat with the allies like Canada and European Union. All these issues affected the sentiment of the commodities.
As the quarter ended, traders started seeing changes in the commodities market. Palladium rose sharply from August. Gold as well started doing well. Crude oil continued to rise as traders started to worry about supply. This article will provide a guidance on how the commodities will perform this quarter.
In this quarter, the price of crude oil will likely continue to move up. This is because there is a possibility that OPEC will continue to leave supplies as they are when they meet in Vienna. In addition, the US sanctions on Iran will go into full effect in the quarter. In recent weeks, the EU and Russia have moved to create a pathway for Iran to continue selling its crude oil. Since the current sanctions will not be as tough as they were before the Iran deal, Iran could continue trading in oil. However, the challenge will be in various ways. For example, many banks will try to avoid Iran as much as possible. In addition, the country’s drillers will have difficulties accessing the technology from the West. In fact, the amount of crude being pumped by Iran has fallen significantly even before the tariffs go into effect. Therefore, it is possible that crude will approach $95.

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Agricultural commodities will likely start to rally. The recent slump was mostly because traders were very pessimistic about trade. However, this week, the US signed a deal with Mexico and Canada on trade. There are also hopes that the US will reach an agreement with China and the European Union. If this happens, there is a possibility that agricultural commodities like corn and soybeans will continue to rise.

Agricultural commodities like sugar, coffee, cocoa and cotton are also expected to do well if the trade issues are solved. However, traders should continue to pay close attention to the statement by the US department of Agriculture which releases the World Agricultural Supply and Demand Estimates (WASDE). This report may guide them on whether to buy or short these commodities.

While metals have been affected by the rhetoric on trade, there is some stability. In fact, palladium has raised by more than 20% from August. This is as traders place their bets on a future trade deal between the US and its rivals. Such a deal will be good for the metals. However, this growth will likely be in the industrial metals like platinum, palladium, and copper. Gold is likely to be an exception. As the Fed continues to talk about tightening, and as the global markets see lukewarm growth, the dollar will likely continue to strengthen. If it does, the strength of gold will be tested.

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