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Today’s links

Oh the irony! The young not only buy vinyl records but now are apparently reading more physical books! Maybe social media feeds are not all bad and could even be driving people to get off them - for example to read real physical books?

Is China about to give the US a loss of face in space and is Elon Musk’s Starship program doomed? China beating the US back to he moon would be a psychological blow to the US and American’s don’t like to have their pride injured, nor does Trump. Would guarantee some fiscal cheddar thrown after the space program, which has shrunk in fiscal terms if not necessarily in absolute terms (largely because of SpaceX’s massive cost efficiencies with the Falcon program) in recent years, even as private space applications are taking off. This will intensify the focus on whether Musk’s Starship will ever make it with crunch time just ahead and if not, what is plan B for the US space program? BTW, another super-critical take on whether the Starship program is utterly doomed from someone with an obvious political axe to grind, but still making some technically critical points.

Privatization can have its drawbacks Convexity Maven speaks against the privatization of government sponsored enterprises Fannie Mae and Freddie Mac, the outfits that traditionally provide liquidity, stability, and affordability to the housing market by buying mortgages from lenders, pooling them, and selling them as mortgage-backed securities to investors.

Chart of the Day - Palantir (PLTR) weekly

Palantir is a fantastically successful company and has featured eight consecutive quarters of accelerating growth, a feat it is expected to extend to a ninth quarter and it will undoubtedly grow massively in the further quarters and years ahead. But its valuation has run so wildly ahead of its impressive growth rates that few Wall Street analysts are even willing to place an overweight, much less a buy rating on the stock. Its woes here are likely in part on noted activist short seller Andrew Left of Citron Research out speaking against the stock’s insane valuation, comparing it with OpenAI’s imputed valuation based on a recent funding round for perspective. It’s usually futile to “pick tops” in a bubble stock, and who is to say that the company can’t eventually grow into the current share price way down the road at a much larger size and once it establishes a major buyback program. Amazon peaked in the dot com bubble at a split-adjusted share price of 5.65 in late 1999 (revenues before falling to 27.5 cents (!), a drop of 95% before rising to its early 2025 high of 242.5, an 88,000+% turnaround and even a nearly 4,200% gain from the bubble high. Akamai Technologies is one of my favourites - the content deliver network company peaked at 345.50 in early 2000 (a year when it posted $89 million in revenue) before falling to 56 cents in late 2002 - a drop of 99.8% only to recover to as high as 129.17 in early 2024 (with revenues of $4 billion), never recovering to even half of its bubble high. Even Palantir has had its own initial bubble round trip - falling from its first bubble high at 45 in early 2021 to as low as 5.92 in late 2022 (-87%) before recovering to its recent 190 high (> +3,100%). Regarding the technical situation here for Palantir currently, in the chart below, it will be interesting to see the weekly close, especially if we close near here or lower - a climactic semi-evening star formation, though so far the correction of 17% is way less climactic than the Feb-Apr correction that was over 45%.

Questions and comments, please!

Key points in this update:

• BCOM TR Index down ~1% in August as gains in metals and softs offset by grains and a steep energy drop.
• Silver and platinum shine as gold remains range bound waiting for the next trigger with focus on Fed and inflation.
•  Energy hit by softening demand outlook, OPEC+ supply boost, and strong gas storage.
• Corn and wheat fall on record US crop outlooks; soybeans firm, coffee up over 10% on Brazil weather.

Macro overview

August has so far been shaped by a tug-of-war between supportive supply-side stories in parts of the commodity market and macro headwinds from weakening economic data in the US and around the world. The latest US inflation data, in the form of a hotter-than-expected July PPI, forced markets to recalibrate their Fed expectations. Just a day after Scott Bessent, the Secretary of the Treasury, called for an aggressive 150 bp rate cut, the data cooled talk of a jumbo move in September, with the market now firmly pricing in a modest 25 bp reduction. US 10-year Treasury yields nevertheless have edged lower during the month, with the 2-year tenor falling the most amid the mentioned prospect of incoming rate cuts and expectations the next chair of the Federal Reserve replacing Jerome Powell early next year will be much more inclined to argue for the cuts so desperately sought by President Trump and Bessent. Following a brief period of strength last month, the US dollar has resumed its broad decline with notable weakness seen against its major peers, led by GBP, JPY, and EUR.

This combination—lower yields and renewed dollar weakness—has so far this month helped underpin non-yielding investment assets such as metals; however, with silver, platinum, and copper seeing most of the demand as gold remains well and truly stuck midrange waiting for the next catalyst.

Overall, from a position of recent strength, US economic data has started to show signs of weakness, joining other economies with global PMIs pointing to slowing momentum in parts of Europe and Asia. Friday's data dump from China showed an across-the-board slowing economy in July, suggesting an impact from Beijing's crackdown to curb overcapacity in businesses from steel to solar and EVs, extreme weather, and spillovers from Donald Trump's tariffs. The oil market remains fixated on the interplay between demand downgrades and OPEC+ supply policy, while in agriculture, the latest WASDE report triggered sharp moves in the grains complex. Soft commodities, led by coffee, have been the standout winners thanks to idiosyncratic weather and policy drivers.

Commodity sector snapshot

The Bloomberg Commodity Total Return Index is down around 1% month-to-date, reducing the year-to-date gain to just 4%, with strength in softs, industrial metals, and precious metals offset by losses in grains and, most notably, the energy sector.

Softs have outperformed on weather concerns, low exchange inventories, and policy uncertainty in key producing nations. Industrial metals have been supported by fading tariff concerns and a copper supply disruption in Chile, while an environmental disaster at a China-owned mine in Zambia underscores the challenges of securing the minerals needed to meet rising power demand, with copper as the key conductor. Precious metals, as mentioned, have seen silver and platinum outshone rangebound gold, not least due to their industrial linkage and a tightening supply outlook.

On the downside, grains, led by corn and wheat, came under pressure from the USDA’s projection of a record US corn crop, while energy suffered from a combination of downgraded demand growth, rising inventories, and OPEC+ continued unwinding of production cuts into what could become an oversupplied market.

Energy: rising supply and macroeconomic headwinds

Crude oil prices have struggled in August, with Brent and WTI both down more than 7% and trading near two-month lows. The International Energy Agency’s latest report cut its demand growth forecast for 2024, citing weaker industrial activity and slower transport fuel consumption. At the same time, OPEC+ has reaffirmed plans to fully unwind its voluntary production cuts by September, bringing barrels back into a market that has started to show signs of a surplus.

However, it is worth noting that only a relatively small part of the 2.5 million barrel increase that the eight OPEC+ members have agreed to has so far been delivered. Partly due to restraint from producers that exceeded their quotas in recent months, while some producers have struggled to increase output, and finally due to strong summer demand among producers reducing what was available for exports. In addition, prices have held up relatively well due to concerns about secondary sanctions on Russian supply and Chinese stockpiling, which according to the IEA, built by around 900,000 barrels per day in the second quarter.

Notoriously volatile US natural gas is one of the weakest performers this month, down more than 8%. Storage injections continue to outpace the five-year average, leaving inventories 6.6% above normal levels for this time of year. Without a significant late-summer heatwave or major hurricane disruption to Gulf Coast production, the ample storage cushion will limit upside, though weather-driven volatility could reassert itself quickly.

Precious metals: silver outshines gold

Gold initially traded lower after a stronger-than-expected US PPI print, on speculation it may dampen rate cut expectations by pointing to a potential upside in July’s Core PCE inflation, likely keeping the Fed cautious. Rising producer input costs risk either squeezing company margins or being passed through to consumers, adding upward pressure on CPI. However, the data does not change our long-held bullish view on gold, as the FOMC will ultimately have to balance inflation control with economic support.

For now, however, gold remains well and truly stuck in a USD 200 range centred around USD 3,350. Still, underlying ETF demand remains firm, rising to a two-year high at 2,878 tons (Bloomberg), suggesting that the market’s longer-term bullish narrative—built around eventual Fed easing and lingering stagflation risks—is intact. The near-term focus will be on the July Core PCE release and its implications for September’s FOMC meeting, and also the annual gathering of central bankers at Jackson Hole from 21–23 August.

Industrial metals: policy noise fades, fundamentals regain focus

Copper has steadied after July’s tariff turmoil, which saw US prices slump relative to London as traders reacted to the prospect of tariffs on key forms of imported refined metal. Clarifications and partial exemptions have helped narrow the Comex–LME spread, shifting attention back to fundamentals. China’s latest trade data hinted at some stabilisation in imports, while mine supply issues in South America remain on the radar.

Grains: WASDE reshapes the landscape

The USDA’s August WASDE report jolted the grains market. Corn futures dropped sharply to contract lows after the agency projected a record 16.7 billion bushel harvest, driven by expanded planted acreage and favourable summer weather. Higher ending stocks forecasts reinforced the bearish tone, and the futures curve has shifted to a more comfortable carry structure, which inadvertently supports speculators already holding an elevated net short position.

Soybeans moved in the opposite direction, supported by a smaller-than-expected crop estimate and tighter balance sheet. While gains have been modest compared with the sell-off in corn, the market is holding a risk premium into the South American planting season, where early weather developments will be key. In addition, ongoing trade talks with China remain on the radar, not least after President Trump urged China to quadruple their purchase of US-produced beans.

Wheat followed corn lower, also hitting a contract low, with ample global supplies—particularly from the Black Sea and Europe—keeping export competition intense. Quality concerns in parts of Europe have provided some localised support, but not enough to offset the overall bearish supply picture, which in the short term could lead to lower supply as farmers, frustrated with low prices, hold back supplies.

Softs: coffee takes the crown

Arabica coffee is the clear standout in August, rallying more than 10% month-to-date. The move has been driven by a combination of Brazilian weather concerns, low certified exchange stocks, and some tariff-related uncertainty adding to speculative interest. The market remains sensitive to shifts in Brazil’s weather outlook and export pace.

Sugar has also posted modest gains, underpinned by policy uncertainty in India, where decisions on export quotas could tighten global supply. Output from Brazil’s Centre-South region has been robust, but the balance between strong production and export restrictions elsewhere is keeping prices supported.

MacroVoices Podcast

Earlier this week, I joined the MacroVoices Podcast to discuss recent developments across the commodities sector and explain why we maintain a long-term bullish outlook. We argue that we are at the early stages of a new super-cycle, driven by global trends such as the energy transition, deglobalisation, defence spending, de-dollarisation, demographics, urbanisation, and climate change—unfolding at a time when ongoing underinvestment in long-cycle projects lags what may be required. Link to the podcast here and on YouTube here.