Most commodity prices fell this week on fears of a slowdown in the Chinese economy and rising trade tensions between the US and China. The exception was oil, which jumped on the announcement of a new OPEC deal, falling US inventories and concerns that supply from Iran could be cut sharply.
It will be a busy week for commodity markets next week. We expect both the “official” (Saturday) and Caixin (Monday) manufacturing PMIs from China to have fallen in June, which could weigh on the prices of industrial metals early in the week.
On Thursday, the release of the minutes of the June FOMC meeting should shed some light on the probable path of US interest rates. The US employment report, due out on Friday, will also help to determine the likelihood of further interest rate rises. We think that growth in non-farm payrolls slowed in June, which could give a lift to the price of gold.
Finally, trade tensions between the US and the rest of the world will remain in focus. China and the US are due to start imposing tariffs on $34bn of each other’s imports from next Friday. Any escalation in trade tensions is likely to add downward pressure to commodity prices.
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