Q4 commodities outlook

The market saw a pause in the rally of oil prices as the world awaited Israel's response to the recent Iranian rocket attacks. This surge in prices, driven by concerns of escalating conflict in the Middle East, saw both benchmark contracts rise more than 3 per cent yesterday to their highest levels since late August. The momentum added to last week's impressive rally of 8 per cent in oil prices. On the other hand, gold prices managed to edge up after experiencing four consecutive sessions of declines. A weaker dollar, coupled with safe-haven demand stemming from geopolitical tensions in the region, provided support for the precious metal. John Haslett, Portfolio Manager and COO at Graphite Asset Advisory, joined CNBC Africa to discuss the interplay between oil and gold, highlighting the complex picture they paint of the macro environment. Haslett emphasized that while weaker dollar typically leads to stronger commodity prices, there are unique and varying drivers for different commodities. He pointed out that unlike previous years, the current market environment showcases a significant divergence in the drivers for gold and oil. The conversation delved into the drivers of gold, with central bank buying emerging as a crucial factor contributing to its strong performance. Haslett noted the structural shift in gold prices following events like Russia's incursion into Ukraine in 2022, which led to central banks, particularly those in emerging markets, doubling their gold purchases to diversify reserves away from the dollar. While tensions in the Middle East continue to support gold prices, Haslett highlighted additional factors such as lower rates in the Western world and a renewed interest in gold ETFs. Regarding gold's future trajectory, Haslett suggested a period of consolidation might be on the horizon, citing technical indicators signaling an overbought market. While gold's fundamental drivers have been robust throughout the year, he cautioned that a potential lack of new buyers could lead to a temporary plateau in prices. Shifting the focus to copper, Haslett highlighted the unique dynamics affecting the metal's price movements. Despite challenges like a contractionary period in US manufacturing and reduced demand from major consumers like China, copper prices have shown resilience due to supply constraints. Haslett explained that since 2016, copper production has lagged behind global economic growth, indicating a tight supply situation. He expressed optimism for copper's long-term outlook, especially in light of potential stimulus measures in China and the increasing demand for copper in the electric vehicle market. As the conversation with Haslett wrapped up, the discussion touched on future developments in China, potential implications of the upcoming US election on commodities, and the evolving landscape of the global economy. Despite time limitations, Haslett's insights provided a comprehensive overview of the intricate dynamics shaping commodity markets. In conclusion, the commodities market continues to be influenced by a multitude of factors, from geopolitical tensions to structural shifts in demand and supply. Investors and analysts like John Haslett navigate this complex landscape, anticipating market movements and identifying opportunities amid uncertainties.