Worries about demand continue to grow

The prices of most major industrial commodities, including oil, fell this week seemingly owing to lingering fears about commodity demand. Concerns are growing about the financial health of some major property developers in China and COVID-19 related lockdowns are being re-introduced, particularly in Europe. Nevertheless, we think that the prices of most industrial commodities, particularly the metals, will rise in the coming months as additional fiscal stimulus in China should more than offset any weakness elsewhere. Next week some markets in China will be temporarily shut due to the “Golden Week” holiday, so most market attention will be focused on the FOMC minutes (Wednesday). These minutes will be closely watched for any shift in language regarding the Fed’s new average inflation targeting policy and guidance about asset purchases. If the minutes suggests that further asset purchases will be imminent, the US dollar could depreciate and provide a boost to commodity prices.