GOLD

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Commodities overview: Oil, Gold and Copper

07/16/2020 | 10:07am

June is a record-breaking month for China, which imported more oil and copper than ever before, thanks to lower prices and an economic recovery. Gold could benefit from a new buying relay as the gold metal is trading within a few percentages of its historical record.

Bargain hunt. China significantly accelerated its pace of Crude Oil purchases last month. This is the result of a relatively attractive crude oil price (WTI < USD 40 a barrel), coupled with China's economic recovery. As a result, Beijing imported nearly 13 million barrels per day (mbpd) in June, a 35% increase over June 2019.

Evolution of Chinese crude oil imports (in mbpd) - source: Bloomberg
Endless appetite. Chinese import records are not just about oil. They have also reached an all-time high on crude copper. Chinese imports rose by 50% compared to the previous month to 656,000 tonnes, a leading indicator of the increase in manufacturing activity in China. However, this trend is expected to fade in the coming months in view of the rapid rise in copper prices.
Evolution of Chinese imports of blister copper (in metric tons) - source: Bloomberg
Final stretch. There has been a lot of talk lately about gold, its relationship with real interest rates, its safe-haven side, investor appetite for dedicated ETFs and, above all, its performance since the end of 2018, which leaves no one indifferent. This environment should remain positive, underpinned by another factor that is coming back strongly, that of central bank purchases. According to a World Gold Council survey, 20% of central banks plan to buy gold by the end of the year.

In a small performance and record parenthesis, the barbaric relic is only a short distance from its historic peak in 2011 at USD 1921. Another effort of a little more than 6% to reach this level. 

 

Trends in the price of an ounce of gold (in USD) - source: Marketscreener
Jordan Dufee
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