Head of Commodity Strategy
Key Points:
The Bloomberg Commodity Total Return Index is on track for a fourth consecutive, if moderate, weekly gain of around 0.5%, lifting the year-to-date return to 13%. Beneath the surface, performance remains highly uneven between individual commodities and those belonging to the same sector. In energy, a small weekly loss in WTI and Brent is more than offset by strength in natural gas and fuel products, most notably diesel, while grains and softs are split between short-covering winners and supply-heavy laggards. Precious metals continue a controlled consolidation quietly stress-testing the risk of an AI-led equity correction and a more fragile US economy.
Below table shows the total return across key commodities and sectors, most of which are included in the Bloomberg Commodity Total Index, an index that is tracked and can be traded through several major ETFs. It is worth noting that contributions to the year-to-date return mentioned have broadened out over the past month from five to nine contracts, with recent strong performances from the two diesel benchmarks, soybeans and aluminium joining the original five: gold, silver, copper, coffee and cattle. Note that major winners and losers such as platinum-group metals (PGMs), feeder cattle, cocoa and orange juice are not members of the BCOM Index, and their performances are therefore not included in the mentioned 13% gain.
Gold is holding near USD 4,000 after repeatedly absorbing intraday weakness, supported by softer US economic data that underpin expectations for a December rate cut, even as signs of strain in the AI complex build: stretched valuations, rising automation-linked layoffs and warnings from major bank CEOs that an equity correction of 10–20% cannot be ruled out.
As highlighted earlier this week in our note on volatility shocks and forced deleveraging, when equity volatility spikes, systematic and risk-targeting strategies sell “whatever is liquid,” including gold, regardless of its role as a hedge. These episodes can trigger sharp but short-lived liquidations in otherwise fundamentally strong commodities.
For now, three factors argue that any AI-led washout in gold and silver is more likely a buying opportunity than the end of the story:
Macro alignment: softer US data and the absence of official releases due to the government shutdown are pushing investors to lean on private indicators. Challenger data showed October layoffs at the highest level for that month since 2003 and total announced job cuts this year pushing above 1 million. That combination of labour market cooling and data darkness supports expectations for a December cut and broadly supportive for non-yielding assets.
Structural buyers remain: central banks, real-money allocators and households outside the AI bubble are using corrections to rebuild protection against fiscal dominance, political risk and currency debasement. None of those themes have improved. Total known bullion-backed ETF holdings only saw a modest 59 tons reduction during the recent 500-dollar correction, a small pullback compared with the 484 tons accumulated earlier this year.
Positioning less frothy than the price suggests: leverage in gold is elevated but not extreme relative to previous blow-off phases, as seen through a recent drop in the open interest on COMEX gold and silver futures. For now, the lack of weekly updates from the Commitment of Traders report has left the market flying blind, especially regarding the level of participation from leveraged funds, a group of traders that actively responds to changes in the technical outlook.
Technically, spot gold’s ability to hold above USD 3,840–3,850 keeps the uptrend intact, with a break of USD 4,046 - the current range high - opening for another extension. For silver, the similar level is USD 49.30; above it, the metal may re-engage momentum and re-price its role as both monetary hedge and constrained industrial input.
In an AI-driven equity shakeout, forced selling can certainly drag precious metals lower in the short run. But unlike segments whose cash flows depend directly on the AI capex boom, gold and silver sit on the other side of that risk: beneficiaries of policy, liquidity and geopolitical responses once the exuberance is challenged.
Crude oil remains rangebound with WTI hovering near USD 60 and Brent in the low-to-mid 60s. The market is caught between forecasts for a sizeable 2025–26 inventory build, driven by strong non-OPEC supply growth and modest demand expectations, and ongoing disruption risks, uneven OPEC+ compliance and refined product tightness. This standoff keeps flat price volatility contained, with Brent stuck in a relatively narrow range while traders increasingly use the forward curve to gauge supply stress. For now, forward spreads show little concern, with six- and twelve-month Brent still in mild backwardation. While the next 3–6 months may prove challenging during a seasonal demand lull, we see current low prices as laying the foundation for the next medium-term bull phase.
Middle distillates have re-emerged as the pressure valve. The spread between front-month ICE gasoil and Brent has surged to around USD 33/bbl, a 21-month high and up more than a third over the past month, reflecting attacks and outages at Russian refineries curbing exports, structurally lean inventories into winter, and continued demand resilience in transport, agriculture and petrochemicals. The message: talk of a simple “oil glut” is misleading. If anything, the market is repricing the risk that crude is plentiful at the wrong quality, in the wrong place, while key products remain tight with the London traded gas oil futures heading for its highest weekly close in 16 months.
US natural gas has staged an aggressive rally, spiking from sub-USD 3 toward USD 4.3–4.4 in just a few weeks as the annual heating season kicks in with colder weather on the horizon, strong LNG exports, an increasingly power hungry US market driven by the rapid rollout of AI related datacentres, and storage builds that, while solid, are now tracking closer to the five-year average. From a trading perspective, a natural gas forward curve often in deep contango makes it difficult to benefit from direct exposure to the price of natural gas. Instead focus on energy companies that focus on natural gas production.
In agriculture, performance has been generally soft with a few exceptions such as coffee and wheat. The recent bounce in US grains and soybeans strengthened further after China suspended retaliatory tariffs on US imports only to retreat as the market was left waiting for confirmation of any soybean purchases while reports of just two cargoes of US wheat bought suggested smaller volumes than expected.
However, before traders started worries about the missing orders from China, a rally had unfolded briefly turning a year-to-date loss on the Bloomberg Grains Subindex to a small gain, driven largely by short covering, thin liquidity and not by a structural bullish shift. With ample global supply across key producers and China’s demand response still underwhelming, the risk is that once the forced buying fades, markets are left to re-price comfortable stocks and softening macro signals. That does not preclude bouts of weather- or logistics-driven strength, but it argues against chasing grains higher without a clear fundamental break.
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