Goldman Sachs has been unabashedly bullish copper this year and they’ve been rewarded by a strong copper rally so far in 2024.

They’re now boosting their year-end forecast for LME copper to $12,000/ton, a 21% rise from current prices and they continue to see another 50% gain (on average) in 2025. Those forecasts would roughly correspond to $5.40/lb this year and $6.75 next year.

Here’s what they wrote:

The copper market’s path into scarcity has gathered momentum so far this year, with the concentrate segment – which sits just before the metal market-moving into extreme tightness. Lacking any near term mine supply solution, the only way to maintain concentrate market function will be via demand rationing. Whilst the metal market has yet to reflect that upstream tightness, we think the increasing bind on refined supply set against healthy end demand leads to an inevitable deficit path ahead. Short run midstream responses have emerged to the higher LME price signal – particularly in scrap and semis – but these are temporary responses which will abate as economics rebalance and respective inventories exhaust. Our latest supply demand estimates point a 454kt metal deficit for this year (vs 428kt deficit previously) and 467kt metal deficit for 2025 (vs. 413kt deficit previously). With the seasonal surplus phase now at an end, we expect deficit accumulation to build momentum into mid-year and particularly H2 this year. Given visible stocks stand at just over 600kt, the potential still persists for that metal tightening path in H2 this year to take the market to a stockout episode by Q4. Whilst we see a near term phase of price consolidation as most likely, given the physical market digests short term responses to the higher LME environment, this will be relatively brief. Given the larger deficits, we upgrade our year-end target on copper to $12,000/t from $10,000/t, whilst raising our full year forecast average price to $9,800/t (vs. $9,200 previously) and retain our average $15,000/t in 2025.

Oil prices decreased in early Asian trading on Wednesday due to growing U.S. crude and fuel inventories and weaker demand, which signal potential challenges in the oil market.

The decline was further influenced by cautious supply expectations before an OPEC+ policy meeting. Brent crude fell to $82.66 a barrel, while West Texas Intermediate dropped to $ 77.95 a barrel.

Inside Day Sets Up

An inside day provides a potential bull trend continuation setup. A decisive advance above today’s high would trigger the breakout. Then, further signs of strength should be seen to reflect increasing demand, including a daily close above today’s high. Once yesterday’s high is exceeded, the path is clear to test higher potential resistance areas. As noted in prior articles, the key higher price area to watch is around the 200-Day MA, now at 2.47. It is also marked by the 50% retracement at 2.46. In addition, a measured move completes at 2.40.

Measured Move Targets 2.40

The measured move is looking for a match with the mid-December rally on a percentage basis. That rally ended at a high of 3.39 to complete a 51.8% advance. A similar size move for the current rally completes at 2.40. It deserves attention especially since the target is close to the 200-Day line. When two or more indicators identify a similar price zone, it is the market’s way of identifying an area of interest. Since there is some distance to be traveled to approach the 200-Day line, it is anticipated to act as resistance on the first approach.

Watch Support on Deeper Pullback

Alternatively, if a deeper pullback happens before a bullish continuation, a drop below today’s low of 2.14 will provide the next sign of weakening. Yesterday’s low of 2.13 may act as near-term support, but if not the prior recent trend high at 2.09 is then a target. During uptrend, it is common for resistance around a prior trend high to act as support during pullbacks.

For a look at all of today’s economic events, check out our economic calendar.

XAU/USD Current price: $2,313.24

• Substantial gains among European indexes weigh on safe-haven demand.
• Treasury yields retreated further from recent multi-month highs, weighing on the USD.
• XAU/USD trades with a softer tone, but absent USD demand limits the downside.

Spot Gold retreated from the $2,330 price zone and trades in the red on Tuesday, although still confined to familiar levels. The slide can be attributed to a better market mood, as European indexes closed with substantial gains. The lack of momentum, however, resulted from United States (US) indexes consonsolidating around weekly highs yet showing little signs of life. Gains among US indexes are modest, as investors lack a clear directional catalyst.

The United States session included a speech from Federal Reserve (Fed)  Minneapolis President Neel Kashkari, who said that the most likely scenario is that interest rates will stay on hold for an extended period. He also said that raising rates is not the most likely but cannot be ruled out. Finally, Kashkari said he would need to see multiple readings on easing inflation to be confident enough to cut rates. His dovish words came as no surprise and had a limited impact on financial markets.

Meanwhile, easing US government bond yields weigh on US Dollar demand. The 10-year Treasury note offers 4.43%, down 5 basis points on the day, while the 2-year note yields 4.80%, down 1 bps and further away from its recent peak above 5%.

XAU/USD short-term technical outlook

Technically, the daily chart for XAU/USD shows it keeps meeting sellers around a Fibonacci level,  the 23.6% retracement of the April/May rally at $2,326.50. The next Fibonacci level and critical support comes at $2,260.80, a potential bearish target should Gold finally lose the $2,300 mark. In the mentioned chart, technical indicators remain within negative levels, with neutral-to-bearish slopes, reflecting the absence of buying interest. At the same time, a flat 20 Simple Moving Average offers dynamic resistance around $2,339,00, while the longer moving averages maintain their bullish slopes far below the current level.

In the near term, and according to the 4-hour chart, XAU/USD is neutral. Technical indicators head nowhere around their midlines, while the pair stands midway between a bullish 200 SMA and a bearish 100 SMA. At the same time, the pair hovers around a flat 20 SMA. Overall, the risk skews to the downside, although limited by absent US Dollar demand.

Support levels: 2,310.40 2,291.20 2,276.50

Resistance levels: 2,326.50 2,340.15 2,356.90 

XAU/USD Current price: $2,313.24

• Substantial gains among European indexes weigh on safe-haven demand.
• Treasury yields retreated further from recent multi-month highs, weighing on the USD.
• XAU/USD trades with a softer tone, but absent USD demand limits the downside.

Spot Gold retreated from the $2,330 price zone and trades in the red on Tuesday, although still confined to familiar levels. The slide can be attributed to a better market mood, as European indexes closed with substantial gains. The lack of momentum, however, resulted from United States (US) indexes consonsolidating around weekly highs yet showing little signs of life. Gains among US indexes are modest, as investors lack a clear directional catalyst.

The United States session included a speech from Federal Reserve (Fed)  Minneapolis President Neel Kashkari, who said that the most likely scenario is that interest rates will stay on hold for an extended period. He also said that raising rates is not the most likely but cannot be ruled out. Finally, Kashkari said he would need to see multiple readings on easing inflation to be confident enough to cut rates. His dovish words came as no surprise and had a limited impact on financial markets.

Meanwhile, easing US government bond yields weigh on US Dollar demand. The 10-year Treasury note offers 4.43%, down 5 basis points on the day, while the 2-year note yields 4.80%, down 1 bps and further away from its recent peak above 5%.

XAU/USD short-term technical outlook

Technically, the daily chart for XAU/USD shows it keeps meeting sellers around a Fibonacci level,  the 23.6% retracement of the April/May rally at $2,326.50. The next Fibonacci level and critical support comes at $2,260.80, a potential bearish target should Gold finally lose the $2,300 mark. In the mentioned chart, technical indicators remain within negative levels, with neutral-to-bearish slopes, reflecting the absence of buying interest. At the same time, a flat 20 Simple Moving Average offers dynamic resistance around $2,339,00, while the longer moving averages maintain their bullish slopes far below the current level.

In the near term, and according to the 4-hour chart, XAU/USD is neutral. Technical indicators head nowhere around their midlines, while the pair stands midway between a bullish 200 SMA and a bearish 100 SMA. At the same time, the pair hovers around a flat 20 SMA. Overall, the risk skews to the downside, although limited by absent US Dollar demand.

Support levels: 2,310.40 2,291.20 2,276.50

Resistance levels: 2,326.50 2,340.15 2,356.90 

This is a market that’s been consolidating with a rounded bottom for a while, and I am long in the market right now, but I am in an ETF. So, while it has moved quite nicely as of late, my gains are somewhat modest. But it’s a longer term position for me, and I’m waiting until we get to about $2.50 to take profit.

We’re at such a historically low level, going back in the longer term charts, that it does make a certain amount of sense that we get a relief rally sooner or later, if for no other reason, then it gets cold again. Because of that, I’m not levered, and I think leverage is something that’s horrible in natural gas markets to begin with.

Looking at the technical analysis, the 20 day EMA is ready to break above the 50 day EMA, and that would be a bullish sign. But we still have the 200 day EMA right around the $2.35 level. In general, a pullback probably offers buying opportunities at the first sign of a bounce, but again, you have to be very cautious with your position sizing.

For a look at all of today’s economic events, check out our economic calendar.

Impact of the Dollar and Treasury Yields

The U.S. dollar index, which compares the dollar to six major currencies, rose slightly by 0.1% to 105.23. This increase is part of a broader pattern where the dollar has gained nearly 4% this year, despite a recent dip of almost 1% following the Federal Reserve’s pause on rate hikes. Concurrently, U.S. Treasury yields saw a decrease, with the 10-year Treasury dropping 3 basis points to 4.459%. This suggests a cautious investor sentiment towards the evolving economic environment and monetary policy.

Federal Reserve’s Stance and Market Reactions

Recent statements from Federal Reserve officials, including Richmond Fed President Tom Barkin, emphasize a wait-and-see approach regarding interest rate cuts, advocating patience until more definitive signs of inflation easing appear. This stance was reinforced by weaker economic indicators, such as the April jobs report which showed an unexpected rise in unemployment from 3.8% to 3.9%, prompting speculation about the timing and extent of future rate cuts.

Investor Outlook and Gold’s Position

Despite the current consolidation in the gold market, underlying factors such as geopolitical tensions and potential banking stresses continue to provide support. The precious metal hit a record high of $2,431.29 on April 12, bolstered by strong buying from central banks and increased demand from Chinese retail investors. This suggests that while short-term profit-taking may dampen price spikes, long-term drivers remain bullish for gold.

Short-Term Forecast

Looking ahead, the market’s attention will remain fixed on upcoming comments from Fed officials, including Neel Kashkari of the Minneapolis Fed. Investors are adjusting their expectations, with current Fed funds futures indicating a 67% likelihood of rate cuts starting in September. Considering these elements, the outlook for gold remains cautiously bullish as it continues to serve as a hedge against macroeconomic uncertainty and currency fluctuations.

Technical Analysis

Oil prices increased on Tuesday following Israeli airstrikes in Rafah, Gaza, amidst ongoing but unresolved ceasefire negotiations with Hamas. This escalation has heightened market apprehensions about prolonged geopolitical tensions, potentially impacting global oil supplies.

Upcoming U.S. crude inventory data is also in focus, with expectations of a decrease in stockpiles, further influencing oil forecasts.

July arabica coffee (KCN24) this morning is up +1.20 (+0.55%), and July ICE robusta coffee (RMN24) is up +33 (+0.82%).

Coffee prices this morning recovered from 2-week lows and are moderately higher.  Short covering emerged in coffee futures today after updated weather forecasts reduced the chances for rain in Brazil next week.

Dryness in Brazil that could reduce coffee yields supports prices after Somar Meteorologia reported Monday that Brazil’s Minas Gerais region received no rainfall or 0% of the historical average in the past week.  Minas Gerais accounts for about 30% of Brazil’s arabica crop.

On April 18, arabica coffee posted a new 2-year high, and nearest-futures (K24) robusta coffee posted a new all-time high last Thursday.  Coffee prices have surged over the past two months due to crop concerns in Brazil and Vietnam.  Robusta coffee continues to surge to new record highs on fears that excessive dryness in Vietnam will limit the country’s robusta coffee production.

Tight robusta coffee supplies from Vietnam, the world’s largest producer of robusta coffee beans, are a major bullish factor.  On March 26, Vietnam’s agriculture department projected that Vietnam’s coffee production in the 2023/24 crop year would drop by -20% to 1.472 MMT, the smallest crop in four years, due to drought.  Also, the Vietnam Coffee Association said that Vietnam’s 2023/24 coffee exports would drop -20% y/y to 1.336 MM.  In addition, Marex Group Plc forecasts a global 2024/25 robusta coffee deficit of -2.7 million bags due to reduced output in Vietnam.

Coffee inventories have rebounded from historically low levels.  ICE-monitored robusta coffee inventories on February 21 fell to a record low of 1,958 lots, although they recovered to a 5-month high today of 3,945 lots.  Also, ICE-monitored arabica coffee inventories fell to a 24-year low of 224,066 bags on November 30, but they recovered to an 11-1/2 month high last Thursday of 661,492 bags.

There has recently been some bearish export news.  Cecafe reported on April 10 that Brazil’s Mar green coffee exports jumped +41% y/y to 3.9 million bags.  Brazil is the world’s largest producer of arabica coffee beans.  Also, Brazil’s exporter group Comexim, on February 1, raised its Brazil 2023/24 coffee export estimate to 44.9 million bags from a previous estimate of 41.5 million bags.  The International Coffee Association (ICO) on April 15 reported that global coffee exports in Feb rose +6.8% y/y to 11.33 million bags, and total 2023/24 global coffee exports from Oct-Feb rose +11.1% y/y to 56.2 million bags.  In a bearish factor for robusta, Vietnam’s General Statistics Office on Monday reported that Vietnam’s Apr coffee exports rose +3.9% y/y to 170,000 MT, and Vietnam’s Jan-Apr coffee exports are up +5.4% y/y to 756,000 MT.

This past year’s El Nino weather event has been bullish for coffee prices.  An El Nino pattern typically brings heavy rain to Brazil and drought to India, negatively impacting coffee crop production.  The El Nino event has brought drought to Vietnam’s coffee areas this year, according to an official from Vietnam’s Institute of Meteorology, Hydrology, and Climate Change.

In a bearish factor, the International Coffee Organization (ICO) projected on December 5 that 2023/24 global coffee production would climb +5.8% y/y to 178 million bags due to an exceptional off-biennial crop year.  ICO also projects global 2023/24 coffee consumption will rise +2.2% y/y to 177 million bags, resulting in a 1 million bag coffee surplus.

The USDA’s Foreign Agriculture Service (FAS), in its biannual report released on December 21, projected that world coffee production in 2023/24 will increase +4.2% y/y to 171.4 million bags, with a +10.7% increase in arabica production to 97.3 million bags, and a -3.3% decline in robusta production to 74.1 million bags.  The USDA’s FAS forecasts that 2023/24 ending stocks will fall by -4.0% to 26.5 million bags from 27.6 million bags in 2022-23.  The USDA’s FAS projects that Brazil’s 2023/24 arabica production would climb +12.8% y/y to 44.9 mln bags due to higher yields and increased planted acreage.  The USDA’s FAS also forecasts that 2023/24 coffee production in Colombia, the world’s second-largest arabica producer, will climb +7.5% y/y to 11.5 mln bags. 
More Coffee News from Barchart

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

XAU/USD Current price: $2,322.62

• Mixed comments from Federal Reserve speakers keep investors hesitating.
• The United States macroeconomic calendar has nothing relevant to offer this week.
• XAU/USD advanced on Monday, although further gains are still unclear.

Spot Gold turned positive at the beginning of the week, with XAU/USD reaching an intraday high of $2,331.88. The US Dollar weakened throughout the first half of the day, although trading conditions were thin amid holidays in Japan and the United Kingdom. The market mood remained upbeat in Asia and Europe, undermining demand for the American currency. After Wall SStreet’sopening, however, the mood temporarily soured, leading to some modest USD gains.

XAU/USD picked up following mixed comments from  Federal Reserve (Fed) officials, as Richmond Fed President Thomas Barkin, voting member of the Federal Open Market Committee (FOMC),  said inflation this year has been disappointing, adding policymakers’ job is not yet done. Furthermore, he said that given the strong labor market, the Fed has time to gain confidence that inflation will fall. Finally, he said he does not see the economy overheating but added the central bank knows how to respond if it does.

Then, it was the turn of John C. Williams, President of the Federal Reserve Bank of New York. His words were mostly dovish. He said that indeed, the Fed eventually will cut rates, adding that the central bank is looking at the totality of economic data. Finally, he noted that job growth is moderating, while the Fed balance sheet’s drawdown has not affected markets.

The macroeconomic calendar will remain scarce in the United States (US) this week, although multiple Fed speakers could set the tone after last week’s moderately hawkish monetary policy announcement.

XAU/USD short-term technical outlook

From a technical point of view, XAU/USD has made little progress, although the odds for a downward acceleration diluted. The daily chart shows the pair trades around a critical Fibonacci level, the 23.6% retracement of the April/May rally at $2,326.50. The daily chart shows the 20 Simple Moving Average (SMA) remains directionless at around $2,340.15, providing near-term resistance. The longer moving averages, in the meantime, maintain their bullish slopes far below the current level. Finally, technical indicators have turned marginally higher, but the Momentum indicator develops within negative levels, while the Relative Strength Index (RSI) indicator stands at around  54, not enough to confirm another leg higher.

In the near term, and according to the 4-hour chart, XAU/USD is losing its early strength. Technical indicators remain within positive levels but are turning flat. At the same time, the pair continues to develop within moving averages, with a bearish 100 SMA providing dynamic resistance in the $2,340 region. On a positive note, the 20 SMA keeps grinding higher below the current level, skewing the risk to the upside.

Support levels: 2,310.40 2,291.20, 2,276.50

Resistance levels: 2,340.15 2,356.90 2,372.85

View Live Chart for XAU/USD 

XAU/USD Current price: $2,322.62

• Mixed comments from Federal Reserve speakers keep investors hesitating.
• The United States macroeconomic calendar has nothing relevant to offer this week.
• XAU/USD advanced on Monday, although further gains are still unclear.

Spot Gold turned positive at the beginning of the week, with XAU/USD reaching an intraday high of $2,331.88. The US Dollar weakened throughout the first half of the day, although trading conditions were thin amid holidays in Japan and the United Kingdom. The market mood remained upbeat in Asia and Europe, undermining demand for the American currency. After Wall SStreet’sopening, however, the mood temporarily soured, leading to some modest USD gains.

XAU/USD picked up following mixed comments from  Federal Reserve (Fed) officials, as Richmond Fed President Thomas Barkin, voting member of the Federal Open Market Committee (FOMC),  said inflation this year has been disappointing, adding policymakers’ job is not yet done. Furthermore, he said that given the strong labor market, the Fed has time to gain confidence that inflation will fall. Finally, he said he does not see the economy overheating but added the central bank knows how to respond if it does.

Then, it was the turn of John C. Williams, President of the Federal Reserve Bank of New York. His words were mostly dovish. He said that indeed, the Fed eventually will cut rates, adding that the central bank is looking at the totality of economic data. Finally, he noted that job growth is moderating, while the Fed balance sheet’s drawdown has not affected markets.

The macroeconomic calendar will remain scarce in the United States (US) this week, although multiple Fed speakers could set the tone after last week’s moderately hawkish monetary policy announcement.

XAU/USD short-term technical outlook

From a technical point of view, XAU/USD has made little progress, although the odds for a downward acceleration diluted. The daily chart shows the pair trades around a critical Fibonacci level, the 23.6% retracement of the April/May rally at $2,326.50. The daily chart shows the 20 Simple Moving Average (SMA) remains directionless at around $2,340.15, providing near-term resistance. The longer moving averages, in the meantime, maintain their bullish slopes far below the current level. Finally, technical indicators have turned marginally higher, but the Momentum indicator develops within negative levels, while the Relative Strength Index (RSI) indicator stands at around  54, not enough to confirm another leg higher.

In the near term, and according to the 4-hour chart, XAU/USD is losing its early strength. Technical indicators remain within positive levels but are turning flat. At the same time, the pair continues to develop within moving averages, with a bearish 100 SMA providing dynamic resistance in the $2,340 region. On a positive note, the 20 SMA keeps grinding higher below the current level, skewing the risk to the upside.

Support levels: 2,310.40 2,291.20, 2,276.50

Resistance levels: 2,340.15 2,356.90 2,372.85

View Live Chart for XAU/USD 

Next Bullish Signal, Above Monday Highs

Following today’s close, a bull trend continuation signal will be generated on a rally above today’s high and confirmed on a daily close above it. However, given that the ascent has stalled within a target zone, the potential for a pullback prior to a continuation higher has increased. This would be healthy for the advance and provide better risk reward opportunities for the next rally.

Pullback May be Short Lived

Last week’s pullback was shallow, indicating underlying strength in demand. A somewhat similar short-term pullback may occur off today’s high. Significant potential support is noted at last week’s low of 1.91 and it marks the maximum decline anticipated for the near-term bullish outlook to be maintained. But support should be seen higher. Watch the 2.17 price zone (resistance and now potential support from February 1 high) and today’s low of 2.13.

Measured Move Points to 2.40 Possibly

The current upswing in natural gas has exceeded the three previous rallies of 22.3%, 32%, and 24.8%, reflecting improving demand. As of today’s high, it was up by 42.9% from the most recent swing low at 1.58 (C). The relative performance confirms that the buyers are back in charge. Analysis of time provides additional supporting evidence for the bull move as the current advance was faster than the prior three.

This is another way to confirm strength as the current advance is only on its seventh day and the three prior rallies completed in three to 11 days. So, based on time there could be further upside. Also, taking a measured move of the fourth most recent rally, that began from the December 13 swing low, further supports a bullish scenario. That rally was 51.8% in 20 trading days. Similar performance in the current move would occur around a 2.40 target zone.

For a look at all of today’s economic events, check out our economic calendar.