As the global recovery from COVID-19 develops (albeit with some notable exceptions) inflation is building. The massive stimulus-response is feeding into inflationary indicators and commodities are at the forefront of this. With the stimulus taps still fully open, the rise in commodities should continue. However, a less positive appetite for risk is taking hold across markets and this could weigh on commodities near term. This may also help to support an underperforming gold.  

  • The commodities rally has been impressive in 2021

  • Copper is leading the way in the metals, whilst oil has also been strong

  • Gold has been the laggard but looks set to continue its growing recovery  

Commodities have been excellent performers in 2021

The commodities geared towards economic re-opening in the US, Europe and eastern Asia (i.e. China mainly) have been putting in stellar performances in recent months. 

Copper (a key commodity used in infrastructure) and oil are leading the way. Our chart of the key commodities shows that in the year to date, Brent Crude Oil has rallied 31% and copper has rallied 34%. Also, note that gold and silver are lagging way behind at the bottom.



Copper and Oil remain strong, for now

The technical analysis for Copper shows continued strength and an acceleration higher in recent weeks. Although the momentum (on Relative Strength Index) is a little stretched, previous rallies have survived with the RSI over 70 for some time before consolidation or correction sets in. 

However, recent sessions have been a little less decisively bullish. A move below initial support at $4.65 would open a correction into the $4.35/$4.55 support area. For now, we would see this as a chance to buy, although the rising 55 day moving average (currently $4.22) is the ultimate buy zone on this bull run.


With Brent Crude Oil (UKOUSD), the strength of the outlook is less decisively bullish. There has been a steady uptrend channel formed in the past few months. Bullish upside breaks to continue the channel seem to be more contained, with frequent pullbacks. These pullbacks have tended to be used as another chance to buy. 

However recent candlestick analysis shows a market struggling for upside in the past week. This comes as risk aversion has set in across equities markets. Today’s downside into $67.35/$68.00 support, around the channel lows, now needs to find support. If so, this would be a potential buying opportunity for a move back higher to test $70.50/$72.00. 

Chart/Brent Crude Oil

However, we must also be aware that momentum on Brent Crude is not especially strong and if the RSI fell below 50 it would be a warning signal. If the price also dropped below $66.50 this would be would begin to seriously question the strength of the move higher. Medium-term support at $64.50 is now key.  

Gold could become an outperformer

The performance of gold in the year to date has been a struggle relative to other commodities. However, measured over the past couple of weeks, the performance of gold is much better. This is coming amidst rising fears of inflation and risk aversion is setting in across markets. Gold could become an outperformer if this continues.


The technical analysis of gold shows that a near term pullback began yesterday (as USD rallied). This could mean a pullback within the uptrend channel. There is multiple technical support from the channel, 21 day moving average and the old breakout around $1800. 


Momentum is also unwinding into an area where upside potential will be renewed (around the 50/60 area on RSI). We would view this as a chance to buy for a continuation of the channel towards $1845/$1855 and a test of the key multi-month downtrend.