What’s Next for Commodity Prices as Attention Shifts To U.S Jobs Report?

Commodities Pull Back as Traders Eye Federal Reserve Rate Cut and Key U.S. Jobs Report

Following a stellar run in August, Commodity prices across the board have pulled back as trader’s bank windfall profits – ready to capitalize on the markets next big move.

These incredible market moves have presented savvy traders with a series of highly rewarding opportunities to capitalize the recent macro-driven rally as well as the huge price reversal that has subsequently followed.

As the famous saying goes, “buy low, sell high” – And that’s exactly the trend that we’re seeing play out across the entire Commodities complex.

With the Federal Reserve set to begin cutting interest rates this month, the main question now is: How big will the Fed’s first rate cut be?

The answer to this question may come from the hotly awaited U.S jobs report for August, due for release on Friday.

The importance of this macro event cannot be understated as it is almost certainly guaranteed to move the markets significantly.

Last month, a sharp rise in the unemployment rate – triggering the Sahm Rule, a historically accurate recession indicator – fanning fears in global financial markets that the economy may be on the brink of a downturn.

U.S. Jobs Data and Fed Rate Decision in Focus as Economy Slows

There is no denying that traders will once again be on the edge of their seats waiting anxiously to see if the July Non-Farm Payrolls data was just an unexpected blip or the start of a weakening trend in the U.S labor market.

According to GSC Commodity Intelligence – “Friday’s employment data could single-handedly determine the pace of the Federal Reserve’s easing cycle and whether policymakers will deliver a modest 25 basis-point rate cut or more aggressive 50-basis-point reduction this month”.

Whichever way you look at it, one thing is clear. The reality is that we are now in an environment, where the economy is slowing down, the labor market is weakening and interest rates will be coming down.

At the same time, while inflation is down, it is not exactly contained – especially when taking into consideration that global government debt continues to grow at an unprecedented rate. Concurrently, Central banks around the world are continuing to increase their Gold reserves in an effort to diversify away from the U.S dollar and geopolitical uncertainty remains elevated.

Regardless of whether the Fed cuts by 50 or 25 basis points, these issues aren’t going away anytime soon. To quote analysts at GSC Commodity Intelligence, this ultimately tells us one thing, and one thing only – “the bullish long-term case for Commodities in a well-diversified portfolio remains firmly intact”.