Commodities: Commodity outlook improving, energy and metals cheap in gold terms

Our commodity supply-demand imbalance model continues point to higher prices over the next 6 months. This is against a structurally bullish geopolitical backdrop of inelastic, politically-driven demand and concentrated supply chains that are increasingly weaponized in a multi-polar world.

In real terms (i.e. deflated by CPI), copper and oil remain well below their highs and have potential to catch up to gold. Both commodities’ relative performance to gold is near multi-decade lows. These have generally marked turning points in relative performance and point to gains for both oil and copper.

In absolute terms, gold continues to benefit from structural tailwinds and should remain a core real asset holding. In July, we highlighted that the gold-silver ratio implied catch up potential for silver (link). Today, after a blistering rally, silver has triggered an LPPL bubble exhaustion sell signal (link), suggesting to take profits.