Precious Metals, Oil, and Gold in 2024

The landscape for precious metals has witnessed significant shifts since the beginning of the year. Platinum and palladium, traditionally integral components in catalytic converters for combustion engines, find themselves facing adversity due to the escalating trend toward electric cars. The persistent decline in their value can also be attributed to the actions of speculative investors who, in January, markedly reduced their net long positions, exacerbating the downward trend.

On the contrary, the performance of industrial metals presents a diverse picture. While aluminium has experienced a loss of over 5% since the year's commencement, tin and lead have emerged as outliers, showcasing substantial gains. The intricate dynamics within the industrial metal sector underline the nuanced impact of market forces on individual commodities.

In the realm of energy markets, oil has undergone a notable transformation. After reaching a nadir at the turn of the year, Brent recently breached the significant USD 80 per barrel mark. Contributing factors to this resurgence include a frigid wave in the United States and attacks by Houthi rebels on ships in the Red Sea. The ensuing retaliatory strikes by the US and the UK have further heightened tensions, leading to disruptions in shipping routes. This, in turn, has resulted in increased oil being held up on the world's oceans, exerting upward pressure on prices.

The delicate balance between oil production and inventory levels plays a pivotal role in determining prices. Higher oil production and mounting inventories tend to exert downward pressure on prices, while a reduction in active oil wells signifies potential future production declines, buoying prices.

Gold, a traditional safe-haven asset, has experienced persistent outflows from Exchange-Traded Funds (ETFs) throughout the year. Approximately 1.4 million ounces have been divested since the year's inception, constituting around 1.6% of global Assets under Management. Despite this trend, the stability of the gold price suggests the presence of alternative physical buyers, potentially including central banks.

The value of gold is intricately linked to fundamental factors such as the US dollar and the real, inflation-adjusted, interest rate. A rise in real interest rates and a stronger US dollar typically weigh on the gold price, while a decline in real interest rates has a supportive effect. The trajectory of gold ETF holdings serves as a barometer of financial investors' demand for the precious metal, reflecting the broader sentiment within the market.

Insights Inspired by Berenberg: Credit to Their Analysis for Shaping Some Aspects of This Text

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