Gold, oil inflows drive global commodity open interest value towards 2022 highs- JPM

Estimated value of open interest across global commodity markets increased by 3.5% week-on-week (~$47 billion), to the highest level since June 2022 of $1.39 trillion, driven by significant price gains across oil, refined products and metals markets, JPM Commodities Research said.

Contract-based inflows across all trader types continued for a fifth week, and reached a year-to-date high of $144 billion, primarily driven by strength in precious and base metals along with petroleum product markets, the bank said in a note dated April 8.

Cumulative flows across all commodity markets:

Image source: J.P. Morgan Commodities Research

According to JPM economists, resilient growth and easing financial conditions boost the likelihood of a “soft-landing” by the U.S. Federal Reserve well into 2025, while sticky inflation raises the risk of fewer rate cuts. They now anticipate that the Fed’s easing cycle will commence in July, with 75bp of cuts projected by year-end.

The estimated value of open interest in global precious metals markets increased by 7% week-on-week to $194 billion, as of Apr 5. Gold and silver led contract-based inflows which totalled $3.9 billion, reversed last week’s outflows.

Gold futures racked up another record high settlement Monday, with momentum driven primarily by central bank purchases, as analysts expect further upside in the metal. Spot gold (XAUUSD:CUR) gained +1.00% to $2,362.80 an ounce as of 6:03 am ET on Tuesday.

JPM strategists highlight that in the near term a break below $2,150/oz in gold “will begin to trigger unwinds of length which could cascade into a sharper correction lower ultimately pushing prices to $2,050/oz.”

The estimated open interest value of global base metals markets soared by 6.5% WOW to ~$190 billion, driven by buoyant copper led inflows of $3.7 billion.

Meanwhile, the estimated value of open interest across energy markets increased by $22 billion WOW to $611 billion. The increase was primarily driven by strong positive price moves in crude oil and petroleum products. Brent crude (CO1:COM) last week settled above $90/bbl for the first time since October, as tensions in the Middle East threaten to boil over into a wider regional war.