Five Key Charts To Watch In Global Commodity Markets This Week

(Bloomberg) -- Gold’s relentless surge to fresh record highs is proving to be a puzzle for many market observers. An oil rally is making it more costly for some traders to protect themselves from surging crude prices in what has quickly become a very bullish market. And as crop traders await insights from the US Department of Agriculture’s key report on global demand, American farmers are enjoying the best-post winter wheat conditions in years.

Here are five notable charts to consider in global commodity markets as the week gets underway.

Bullion

Gold’s torrid rally last week, which saw the precious metal tear above $2,300 an ounce, took plenty of onlookers by surprise as Treasury yields rose — typically a headwind for bullion. The conundrum suggests stronger factors at play, with robust central bank buying and increasing consumer demand in China adding to gold’s momentum. While a short-term correction may loom at current overbought levels, the outlook is mostly bullish. Soft futures positioning suggests there’s room for more speculative juice that could fuel further gains, while the much-anticipated Fed pivot to lowering rates — when it happens — is likely to see investors flock to gold-backed exchange-traded funds again after months of outflows.

Oil

For the first time since November, oil options traders are paying more to hedge against rising crude costs. The gauge known as the so-called skew is showing demand for bullish call options than bearish puts. The market’s flip to the call skew underscores the magnitude of bullish sentiment for crude, amid heightened geopolitical tensions. The global benchmark Brent rose above $90 a barrel for the first time since October last week, while West Texas Intermediate has also surged to levels not seen in nearly six months.

Wheat

A resurgence in the US wheat crop is coming just as health-conscious consumers are buying less food made with the staple grain. Easing drought in America’s breadbasket has wheat crop-conditions at the best level in four years. Meanwhile, millers have been churning out less flour. Taken together, that means less domestic demand for wheat when American farmers were already losing ground in export markets to cheaper supplies by top shipper Russia. The USDA will release its World Agriculture and Demand Estimates Thursday, shedding light on demand for harvested wheat and other crops.

Coffee

Coffee is soaring, with both the cheaper robusta beans and the premium arabica variety on a tear. Robusta futures are trading near record highs as a heat wave threatens production in top exporter Vietnam, adding to concerns over tight global supplies of the beans used in instant coffee. Arabica — the type favored by Starbucks Corp. — is at its highest in 17 months, as roasters eye the bean as a robusta substitute in blends. The market may get signs of whether relief is in sight from Brazil — the No. 1 arabica supplier — when industry group Cecafé releases monthly export data later this week.

Electric Vehicles

Sales of passenger EVs are facing some speed bumps ahead that could bring a likely slowdown in annual growth rates around the world, according to BloombergNEF’s latest report on the industry. A regulatory reshuffle in Europe, market saturation in China and uncertainty in the lead-up to the US presidential election could all take a bite out of consumer confidence. Still, BNEF estimates that annual EV sales this year could climb 22% to 16.7 million passenger EVs globally — a deceleration from last year’s 30% jump.

--With assistance from Doug Alexander and Michael Hirtzer.

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