The price rally may be starting to run out of steam

Aside from coal and natural gas, the prices of most commodities fell this week in tandem with the declines in global equity markets. Investors are concerned about rising inflation, particularly in the US, and have seemingly reduced their exposure to risky assets, such as commodities and equities. We think that rising 10-year yields will limit the upside for risky assets. Accordingly, we expect that commodity prices will fall across the board as the progressive easing of lockdowns enables supply to continue to recovery. Next week, China’s April activity and spending data will be released on Monday. We anticipate that industrial activity will slow a touch owing in part to the ongoing shortage of semiconductors, which could dampen investor risk appetite for industrial commodities. Otherwise, on Wednesday, we expect to see the FOMC re-iterate its commitment to ultra-loose monetary policy in the minutes of the Fed’s 27-28^th April meeting minutes, which could weigh on the US dollar and support commodity prices.