Funds bet on bullish commodity cycle

Raw materials

Posted by MoneyController on 28.05.2024

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Moving the commodities market today seems to be mainly institutional investors, in anticipation of a bullish cycle.

Commodities: Is a bullish cycle on the way?

More than one analyst believes that the commodities market, in particular certain minerals and industrial metals, will be characterised by a bullish price cycle. In view of this prediction, fund managers seem to want to be prepared. Luca Pagni writes about this in ‘Affari&Finanza’ (‘La Repubblica’), picking up on an article in the ‘Financial Times’.

Long positions on the London Stock Exchange increase

Last year was a bearish period for large segments of the commodities market. Today, however, as Pagni points out, on the basis of the derivatives market it is possible to guess that funds are preparing for a price rally: this is shown, for example, by the rise in so-called ‘long positions’ on the London Stock Exchange, which indicates confidence on the part of institutional investors.

But the bullish cycle has yet to really begin

Pagni writes that funds are moving ahead of the real market movements: in fact, there are still some restraining factors weighing on the commodities market: on the one hand, the discontinuation of some wind energy projects (notably, off-shore wind power), also due to rising credit costs; on the other hand, demand from the ‘manufacture of the world’, China, which is still below expectations.

Energy transition and digitisation: a driver for commodities

In the meantime, it is possible to detect some signs in anticipation of growth in the commodities market. The Australian mining company Bhp is looking to acquire existing and operating mines, rather than opening new ones, a move that would require a lot of investment and time. However, the Australian mining company does not want to be unprepared for the global challenge of energy transition and digitisation, two phenomena that require a large use of raw materials, including silver and, in particular, copper.

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