Industrial metals prices pushed higher this week, while the prices of oil and gold were broadly flat. For now, the robust recovery in Chinese demand for metal still seems to be enough to offset weaker demand elsewhere. That said, the latest PMI data suggest that commodity demand in Europe is coming off the boil. This follows the stepping up of containment measures by several governments in response to an upward trend in daily virus infections. Provided that these measures are effective, demand should start to pick up as they are lifted.
The main event next week will be the annual Jackson Hole symposium in the US, which begins on Thursday. If, as we expect, the Fed announces some form of average inflation target, it would signal that US monetary policy will remain loose for longer. Accordingly, US real yields are likely to drift lower, giving a lift to the prices of gold and other precious metals.
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