In a world infected by Brexit panic and from the Central Banks' anguish in attempting to help more or less directly the second phase of restructuring of the banking system, commodities re-emerge, finally emerging from the quicksand of an all-time low fueled by a sluggish and stagnant global economy caused by deflation.
In June, the long positions on oil and gold strengthened and especially on gold. In the first ten days of June, zinc stands out among the industrial metals, regaining the highs for 11 months on the improvement of the Chinese outlook and the monetary stimuli from the ECB. Copper and aluminum also follow closely after US data further shifted expectations of a rate hike in July, fueled by some improvident timing statements by Yellen herself. Copper has therefore come out of a momentary contagion situation that had worried analysts.
And while the rally on oil is losing strength, and sees an important barrier at 52 US dollars on Brent, it should be noted that the data on oil rigs, drilling rigs Made in the USA, have started to grow again after months of uninterrupted correction signaling a recovery of the shale oil industry. With investors on the hunt for defensive assets or in any case with limited volatility, commodities are once again popularizing portfolios as a diversification from the equity overexposure and a bond sector with unattractive spreads compared to the actual risks.
Gold, for its part, was bought massively on the correction close to 1200 $/oz right after Yellen's speech at the end of May and is giving satisfaction from a perspective of perceived risk aversion and correlated to the multiplication of polls which days record a victory for the front that wants Great Britain to leave the EU. It will be necessary to see if he will have the strength to go beyond the psychological threshold of 1300 $/oz given that the support in terms of volumes via ETF has now been going on for ten days.
This attempt by commodities to stand out is closely related to Chinese growth which sees the Government trying to compensate for still weak private investments and above all, in view of the imminent entry of list A shares in the MSCI index, trying to downplay the yet another broadside coming from the IMF. In fact, the number two of the International Monetary Fund Lipton has once again underlined the concerns for the sustainability of the Chinese debt in the face of a high exposure of the Corporate debt, (equal to 145% of the Gdp), and the Deputy Governor of the Central Bank of China has not hesitated in confirming that the so-called Zombie Corporates and financial institutions that are unable to guarantee their economic sustainability to the system will be left bankrupt. And many measures have already been defined also to improve the efficiency of those state-owned enterprises which are responsible for half of the total exposure but which guarantee only 22% of total productivity.
Moreover, the figure for car sales in China in May, up 11,3% to 1,79 million cars compared to last year, did not transfer the desired effects to platinum and palladium. There was also little reactivity on the side of agricultural soft commodities, not only due to the problems linked to the frosts which conditioned the coffee and sugar harvests in Brazil but also due to the uncertainties regarding Chinese estimates on cotton production and consumption of this more commodities segment general.
So if you are fed up with polls taken outside English pubs and don't want to think about the upcoming Spanish elections or the appeal of the Governor of the Central Bank of Greece for further delays in debt repayments, it is worth looking carefully at the industrial metals sector and the Chinese economy which will be the next major issue in the second half of the year in view of a new slide in the rembimbi yuan which we hope will not have the same results as last August XNUMXth.
