• Ole Hansen, Head of Commodity Strategy, Saxo Bank

Key Points:

• Commodities keep pace with equities: The BCOM Total Return Index has gained 26% year-to-date, outperforming the S&P 500 and broadly matching the Nasdaq despite the intense focus on AI-driven equity gains.

• Precious metals regain momentum: Gold, silver and platinum lead August gains as softer US data, a less hawkish Fed backdrop, dollar weakness and renewed ETF demand add to continued central bank and Chinese buying.

• Physical scarcity supports metals and agriculture: Copper supply constraints, US inventory hoarding and resource nationalism are combining with robust Chinese demand, while El Niño risks, extreme heat and Black Sea disruptions support agricultural markets.

• Energy returns extend beyond headline oil prices: Middle East and Russian supply disruptions, depleted inventories and tight refined-product markets maintain steep backwardation, boosting total returns even as prompt crude prices remain stuck at levels that do not signal a crisis.

Commodities have continued this month to build on the strong and broad gains the sector delivered in July, when the Bloomberg Commodity Total Return Index (BCOM TR) posted a 7.5% gain. Together with a further 2.4% rise so far this month, lifting its year-to-date return to 26%, the index has now clawed back the bulk of the near 12% loss incurred during April and May. That puts commodities ahead of the S&P 500 at around 21% and on par with the technology-heavy Nasdaq, despite the intense investor focus on artificial intelligence and technology stocks. Gains have been supported by a combination of improving macro conditions and increasingly visible supply constraints across several key markets.

Perhaps more importantly, the latest advance has been broad-based. All major commodity sectors are contributing positively, led by precious metals, agriculture and industrial metals. Energy has delivered a more modest gain, although steep backwardation means total returns continue to exceed what movements in headline crude oil prices alone would suggest.

The common thread is scarcity, albeit in different forms. Precious metals are benefiting from continued central bank and, recently also renewed investor demand amid fiscal concerns and a less hostile monetary backdrop. Industrial metals are increasingly influenced by constrained mine supply, strategic stockpiling and resource nationalism. Agriculture faces growing weather and geopolitical risks, while energy markets remain exposed to Middle East and Russian supply disruptions and depleted inventories.

Precious metals return to life

Precious metals lead the August advance with an 8.2% gain, although the sector remains marginally lower on the year, having spent the past few months consolidating following the slump that followed the January surge to record highs. Despite some end-of-week profit-taking emerging following the recent strong run, August has so far seen silver jump 12%, gold 7% and platinum 4.6%.

The recovery has been supported by a combination of macro and fundamental developments. The July Federal Reserve meeting was less hawkish than markets had feared, particularly given that a meaningful probability of another rate increase had been priced beforehand. That was followed by the US-Japan intervention episode to support the yen, involving the US Treasury alongside Japan’s Ministry of Finance. The resulting strengthening of the yen added pressure to the dollar, while subsequent weakness in US employment indicators and softer-than-expected inflation data provided another supportive impulse.

Importantly, gold has strengthened despite US real yields remaining historically elevated. This suggests the rally is not simply another rates-driven move. Fiscal and debt concerns, geopolitical uncertainty and continued reserve diversification remain important sources of demand.

Central banks continue to provide an important structural floor after the World Gold Council reported a fivefold increase in official-sector buying during the second quarter compared with the first. Robust Chinese physical demand has provided additional support, much as Asian and central bank buying did during 2022–23, when aggressive Western monetary tightening and an exodus from bullion-backed ETF’s failed to trigger the deep correction many investors had expected.

The latest move has also been accompanied by signs that Western investment demand is returning, including renewed inflows into gold-backed ETFs. After a rapid rally, some profit-taking was inevitable, particularly with the Federal Reserve not yet completely out of the tightening conversation. For now, we view the latest weakness as position trimming rather than evidence that the recovery has run its course. From a technical perspective, the key levels to watch in our opinion are USD 4,200, the recent top of the range and now support, while the upside is capped around USD 4,500, where the important 200-day moving average is currently located.

Copper and the global scramble for metal

Industrial metals are up 1.4% this month, with copper gaining around 2%. Copper briefly reached a record USD 6.8665 per pound last week in New York before retracing towards USD 6.65, but beneath the volatility a potentially powerful structural story continues to develop.

The market increasingly resembles a struggle over where available copper is located and who controls it.

Mine supply continues to disappoint. Producers in Chile and Peru are struggling to deliver meaningful production growth, while operational disruptions and declining ore grades remain persistent challenges. In the Democratic Republic of Congo, restrictions on exports of copper and cobalt concentrates highlight another developing theme: resource-rich countries increasingly want to retain more processing and economic value domestically.

At the same time, US tariff policy has created an extraordinary geographical distortion. The prospect of import tariffs encouraged traders to move large volumes of copper into US warehouses, effectively pulling available metal away from other consuming regions. US inventories have consequently surged to record levels, now accounting for an unprecedented 666,000 tons or 70% of visible stocks monitored by the three major futures exchanges in New York, London and Shanghai.

This does not mean the world has suddenly run out of copper. It does, however, mean that an increasing proportion of visible inventories may be sitting in the wrong place, in this case the U.S. which overall accounts for around 6% of total global demand. In a market where mine-supply growth is already struggling to keep pace with demand, geographical fragmentation increases the risk of regional shortages and price dislocations.

China adds another important dimension. The world’s second-largest economy remains distinctly two-speed. Property and construction continue to struggle, traditionally a major headwind for industrial metals. However, high-tech manufacturing, electric vehicles, renewable energy, grid investment, robotics and AI-related infrastructure remain areas of strong growth, and many are highly metal intensive.

The result is that weak Chinese property activity no longer automatically translates into weak copper demand. Combined with electrification demand elsewhere, strategic stockpiling and constrained mine supply, the ingredients for continued tightness remain firmly in place.

Agriculture faces weather and war risks

Agriculture has gained 3.2% this month and around 14.5% year-to-date, with the main drivers predominantly being supply related to weather and war. Recent gains have been driven mainly by sugar, cocoa, wheat and corn, while the year-to-date advance has been supported by the soybean complex amid the demand-supportive link between biofuels and surging fuel prices. In the months ahead, the risk of adverse and volatile weather remains elevated amid a strengthening El Niño, which tends to bring drought to parts of Asia and Australia while increasing rainfall and flood risks in South America, compounding regional supply shocks, volatility and geopolitical disruption.

Sugar has been the standout performer, rising almost 15% this month. A developing El Niño is raising concerns about production prospects in several important growing regions, particularly India and Thailand. At the same time, European sugar production is expected to fall towards a decade low following reduced beet acreage and adverse weather.

Brazil remains the key swing producer, and the recent price recovery has altered the relative economics between producing sugar and ethanol. Higher sugar prices encourage mills to direct more cane towards sugar production, providing a potential supply response, but this will take time and leaves the market vulnerable to further weather-related setbacks elsewhere.

Cocoa has also rebounded as concerns return over West African production. Ghana and Côte d’Ivoire remain exposed to adverse weather and crop disease following several challenging seasons, while a strong El Niño could create additional stress.

Wheat has meanwhile regained a geopolitical premium following renewed attacks on Black Sea export infrastructure. Ukrainian attacks on Russian grain facilities and Russian strikes against Ukrainian ports have highlighted the vulnerability of one of the world’s most important agricultural export corridors. With both countries major wheat suppliers, repeated disruption could tighten physical availability even if global inventories on paper remain adequate.

Corn has received support from the latest USDA estimates. The bullish surprise came not from acreage, which was raised, but from yield. USDA lowered its US yield estimate to 180.7 bushels per acre from 183 previously. Combined with stronger exports and reduced beginning stocks, the adjustment tightened the projected balance sheet.

The broader agricultural story is therefore becoming increasingly weather-sensitive. A very hot Northern Hemisphere summer, rising El Niño risks and continued disruption around the Black Sea may, in our opinion, provide additional support during the coming months, although ample supplies in markets such as rice, soybeans and certain coarse grains like barley and sorghum remain an important counterweight to further upside.

Energy: the curve tells a different story

Energy is the weakest-performing commodity sector this month but is still positive on a total-return basis, and overall and by far the biggest contributor to the overall year-to-date gain. WTI crude has fallen around 2.7%, while Brent has managed a modest gain. However, focusing solely on prompt prices understates the returns being generated by a market characterised by steep backwardation.

The Middle East crisis remains the dominant source of volatility. Crude continues to gyrate on headlines surrounding the Strait of Hormuz, with traders caught between expectations that an eventual agreement could release additional Gulf barrels and the reality that six months of disruption have left global inventories depleted.

Strategic reserves have been tapped, Gulf production remains well below potential, and refined-product markets, particularly diesel, gasoil and jet fuel, remain exceptionally tight. Russian refinery disruptions have added another layer of stress to a market already missing significant Middle Eastern refining capacity.

At the same time, weak Chinese crude imports and expectations that Hormuz will eventually reopen continue to limit the willingness of investors to chase outright crude prices higher. The result is an unusual combination: relatively restrained headline prices alongside a futures curve signalling considerable near-term scarcity.

In many ways, the oil curve continues to price scarcity today and normalisation tomorrow. For investors exposed through total-return commodity indices, that distinction matters because positive roll yield from backwardation can deliver returns well beyond what the movement in the front-month futures contract suggests.

Different forms of scarcity

The broader commodity story is becoming less dependent on a single macro catalyst. Precious metals are responding to renewed investment demand, fiscal concerns and a less hostile monetary environment. Industrial metals are being supported by constrained mine supply, strategic stockpiling and a growing tendency among producing nations to protect critical resources. Agriculture faces a combination of El Niño, extreme heat and renewed Black Sea disruption, while energy remains exposed to depleted inventories and geopolitical uncertainty.

There are obvious caveats. El Niño-related crop losses are still a risk rather than a certainty. Record copper prices will encourage substitution, recycling and eventually additional production. An agreement that allows the Strait of Hormuz to reopen could trigger another sharp oil correction, while still-elevated interest rates remain a potential challenge for precious metals.

Nevertheless, the breadth of the current advance is notable. With all major sectors contributing positively this month, commodities are no longer relying on one market or one narrative to generate returns.

After gaining 26% this year, the Bloomberg Commodity Total Return Index has quietly outperformed the S&P 500 and kept pace with Nasdaq despite the extraordinary attention surrounding the AI-driven equity rally. The forces supporting commodities are very different, but increasingly interconnected: monetary and fiscal uncertainty, physical supply constraints, strategic stockpiling, weather disruption and geopolitical fragmentation.