Crude Oil Approaches Two-Month Highs

Last month we posed the question of whether investors were sleeping on commodities. And then, a week later, we talked about the rally in natural gas. 

Well, ahead of this week’s inflation data, we found it interesting that crude oil and the entire energy commodity complex are rallying.

Let’s take a look at the chart of crude oil futures. 👇

After several months of treading water in the high sixties and low seventies, prices appear to have stabilized and are now approaching a two-month high. Additionally, the oil services ETF $OIH, is approaching its year-to-date highs. Traders say this industry is the most levered to the price of oil, so its recent strength could signal that market participants are positioning for oil prices to go higher. 🛢️

If crude oil continues to rally, it could indicate that the market believes economic demand could be better than initially anticipated. With a recession around the corner, many had expected a continued decline in crude oil prices. But global production cuts and an improving economic outlook may mean the equilibrium price could be higher than current levels. 🤔

The recent rally won’t impact this week’s inflation data. However, if energy prices heat up again in the coming months, it will be a significant headwind for bringing headline inflation down to the Fed’s 2% long-term target. As a result, the market will be watching crude oil (and all energy commodities) closely as a “real-time” inflation gauge. 🌡️

As always, we’ll have to wait and see how things play out. But energy futures and stocks are definitely capturing traders’ attention after their recent strength. 👀

Copper Crumbles Amid Recession Fears

If you’ve been consuming financial market-related content for a while, you’ve probably heard the phrase “Dr. Copper” at some point. Well, the doctor was in today, so let’s hear what he had to say. 👂

For those of you confused, market participants often refer to copper futures as “Dr. Copper.” The reasoning is that copper is an industrial metal critical for most aspects of global economic growth. As a result, investors and traders will often use copper futures as a liquid market to express their views of the economy. And for those that don’t trade it directly, they look at it as a barometer for the overall market’s economic outlook. 🧭

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Gold Soars To All-Time Highs

About a week after the chatter around gold began to pick up on Stocktwits, the shiny metal is hitting new all-time highs. But still, some are perplexed as to why it’s rallying. 🤔

Bears argue that gold should not be rallying in the current environment. After all, inflation continues to trend back toward the Fed’s 2% target, and the economy is holding up well thanks to a strong labor market and consumer spending. And with the risk-free rate still above 5%, some investors and traders argue there are better alternatives to gold and precious metals as a group.

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The Move Hedgers Have Been “Wheating” For

Agricultural commodities like orange juice, lumber, sugar, soybean meal, and more have quietly been some of the best-performing assets year-to-date. 🤩

We recently discussed the rebound in lumber and orange juice squeezing to fresh all-time highs. Today we’re going to look at why wheat is getting major attention from traders.

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