Brent crude has climbed above USD 112 a barrel, its highest level in five months, as Middle East tensions renew concerns about energy supply. Copper and gold, meanwhile, are under pressure from risk aversion, uncertainty over AI investment and speculative position reductions, according to Ole Hansen, Head of Commodity Strategy at Saxo Bank.
AI concerns weigh on copper
A decline of more than 500 points in the Nasdaq has focused attention on whether the investment boom surrounding artificial intelligence can sustain expectations for future electricity infrastructure and data-centre demand. High Grade copper futures fell 2.4%, breaking recent support near USD 6.50 per pound. Investors are also monitoring whether the US will introduce tariffs on refined copper. A decision not to proceed could unwind stockpiling motivated by tariff fears.
The longer-term physical market still benefits from electricity grid expansion, electrification and constraints on mine supply. Much of the visible exchange-held copper inventory is concentrated in the United States, making the location of stocks an important element of the market picture.
Brent above USD 112; European gas remains exposed
Oil prices have moved higher despite broader market weakness. Renewed Middle East hostilities and concern about shipping, freight costs and damage to energy infrastructure threaten supply continuity. Tight refined-product markets, especially diesel, could amplify the impact of further disruptions.
European gas prices are around EUR 90/MWh, equivalent to roughly USD 29.50/MMBtu in the cited analysis. Relatively low stocks increase Europe’s dependence on uninterrupted imports through winter, particularly if cold weather coincides with LNG disruptions. Higher energy costs can also complicate inflation forecasts and monetary policy.
Gold investors split between trading and strategic buying
Gold has repeatedly struggled to hold above USD 4,100 even as geopolitical and fiscal risks increase. Hansen attributes part of the weakness to short-term macro traders cutting exposure, while longer-term investors continue buying physical-gold-backed ETFs.
Since 25 August, money managers including hedge funds and commodity trading advisers have reduced net long exposure by approximately four million ounces. Over the same period, gold ETF holdings tracked by Bloomberg increased by 2.3 million ounces. Higher French bond yields—above 5% on ten-year securities in the analysis—illustrate investors’ concern about fiscal risk.
Grain prices retreat sharply
The Bloomberg Grains Index declined about 14% over six weeks as harvest pressure and improved supply forecasts prompted investors to close long positions. Aggregate net long positions in six major grain and soybean futures contracts dropped from more than one million contracts to roughly 750,000. Weather risks, including the possibility of a strong El Niño, and disruptions to food exports could still increase volatility.
The role of commodities in investment portfolios
Commodity returns depend on spot-price movements, collateral interest and futures roll yields. When futures curves are in backwardation, rolling positions may produce a positive yield if the curve remains otherwise unchanged; in contango the effect can be negative. Hansen argues that supply constraints and geopolitical uncertainty justify tactical commodity exposure, although performance is likely to vary considerably by market.
Analysis: Ole Hansen, Head of Commodity Strategy, Saxo Bank. Original Polish article.
