What is driving the commodity markets right now?

Commodity markets have been unusually active over the past week, but the reasons behind the moves differ considerably from one market to another.

Copper is being driven largely by physical tightness and the movement of inventories into the United States. Gold has responded to weaker US labour-market data and changing expectations for Federal Reserve policy. Platinum continues to reflect a combination of precious-metal flows and a structurally tight physical market, while crude oil remains dominated by geopolitical risk and disruption around the Strait of Hormuz.

For traders, the important point is that these markets cannot be analysed through one common macro lens. Each commodity is responding to a different mix of supply, demand, monetary policy and geopolitical risk.

Copper: Tight supply is more important than strong growth

Copper has remained exceptionally firm, trading around $6.65 per pound in the US and close to $14,400 per tonne on the London Metal Exchange.

COMEX copper reached a record closing price of $6.703 per pound on 5 August, but the strength in the market is not simply a story of accelerating global growth.

The more important development is the tightening physical market outside the United States.

More than 200,000 tonnes of copper arrived in the US during July, the largest monthly inflow in at least 12 years. US-based COMEX and LME warehouses have consequently accumulated more than 740,000 tonnes of copper.

By late July, CME warehouses alone held around 58% of visible global exchange inventories.

The reason is largely related to expectations surrounding possible US tariffs on refined copper. Traders have had an incentive to move metal into the United States before any change in tariff policy, effectively pulling available copper away from other parts of the world.

That geographical shift matters.

LME copper inventories fell from around 238,350 tonnes on 4 August to approximately 214,550 tonnes by 11 August. That is a fall of close to 10% in just one week.

The futures curve is also reinforcing the same message.

LME cash copper has been trading around $208 per tonne above the three-month contract. This is known as backwardation and is normally associated with tight immediate supply. Buyers are willing to pay more for copper today than for copper delivered several months from now.

Chinese exchange inventories have also fallen sharply from their March highs, although the demand picture in China is not entirely bullish. Manufacturing activity remains relatively soft, meaning the current copper strength is not being driven by a straightforward boom in Chinese industrial growth.

There are also continuing supply risks.

The Democratic Republic of Congo has introduced restrictions on exports of some copper concentrates, while production problems at major operations such as Grasberg remain part of the broader supply story.

Meanwhile, long-term demand remains supportive.

Electricity grids, electric vehicles, renewable energy infrastructure and the rapid expansion of AI data centres all require significant amounts of copper.

The overall picture is therefore unusual: global growth signals remain mixed, yet the physical copper market is tight.

For traders, that makes inventory levels, exchange spreads and the location of physical metal particularly important.

Gold: Weak US employment changes the rate story

Gold has also had a strong week, but for very different reasons.

Spot gold is trading around $4,390 per ounce, compared with roughly $4,086 on 4 August. That represents a gain of more than 7% in just over a week.

The main catalyst has been a change in expectations for US monetary policy.

July’s US employment report was significantly weaker than expected. Nonfarm payrolls were forecast to increase by around 80,000, but instead fell by 23,000.

May and June payroll figures were also revised down by a combined 103,000 jobs.

The unemployment rate remained relatively low at 4.1%, but the broader message from the report was that employment growth is losing momentum.

Markets responded by reducing expectations for another Federal Reserve rate increase.

Immediately after the jobs report, the probability of a September rate increase fell from around 57% to approximately 44%.

That matters enormously for gold.

Gold produces no yield, so when markets expect lower interest rates and lower bond yields, the opportunity cost of holding gold falls. A weaker US dollar can provide an additional tailwind because gold becomes cheaper for buyers using other currencies.

Geopolitical uncertainty has added another layer of support.

The continuing situation around Iran and the Strait of Hormuz has maintained demand for safe-haven assets, although the relationship is not entirely straightforward.

Higher geopolitical risk can support gold directly, but if the same risk drives oil prices significantly higher, it can also increase inflation expectations. If higher inflation forces the Federal Reserve to remain restrictive, Treasury yields could rise and create a headwind for gold.

Central-bank demand remains another important part of the picture.

China added around 20 tonnes of gold to its official reserves during July, while global gold-backed ETFs attracted roughly $3 billion of net inflows during the month. ETF holdings increased by approximately 23 tonnes.

This means investment demand is improving at the same time that central banks remain active buyers.

The next major psychological level is around $4,500 per ounce.

The broader gold story, however, remains centred on the Federal Reserve.

If US data continues to weaken without a corresponding acceleration in inflation, the environment remains supportive for gold. If inflation stays high enough to force further tightening, the market could become more vulnerable.

Platinum: A precious metal with an industrial supply problem

Platinum has been another strong performer, trading around $1,760 to $1,770 per ounce after gaining 7.1% in a single session on 4 August.

Platinum is more complicated than gold because it sits between the precious-metals and industrial-metals markets.

It can benefit from lower interest-rate expectations and a weaker dollar, but it is also heavily influenced by automotive demand, industrial activity and physical supply.

The physical market remains structurally tight.

Current forecasts suggest platinum demand of around 7.674 million ounces in 2026 against supply of approximately 7.377 million ounces.

That leaves an expected deficit of roughly 297,000 ounces.

If realised, this would mark the fourth consecutive annual platinum deficit.

Above-ground inventories are forecast to fall to around 1.747 million ounces by the end of the year, equivalent to less than three months of global demand.

That leaves the market relatively exposed to further supply disruption.

South Africa remains central to the platinum story, producing roughly 70% of global mine supply. This geographical concentration means any operational, labour or power-related disruption can have an outsized impact on the market.

Automotive demand remains one of platinum’s most important demand sources.

Around 2.959 million ounces of demand is expected to come from the automotive sector this year. Hybrid vehicle production is forecast to rise by roughly 12%, which is important because hybrids still require catalytic converters.

Battery electric vehicles remain a longer-term risk because they do not use conventional exhaust systems and therefore do not require traditional autocatalysts.

Industrial demand is another supportive factor, with consumption forecast to increase by around 9%.

Jewellery is the weaker part of the picture. Global platinum jewellery demand is expected to decline by around 12%, with Chinese demand particularly soft.

Longer term, hydrogen technologies and potential AI-related PGM applications could create additional demand, although these areas should still be viewed as developing themes rather than dominant current drivers.

For now, the most important point is that platinum combines improving macro conditions with a physical market that remains in deficit.

That makes it very different from gold, where monetary policy dominates the discussion.

Crude Oil: Hormuz is driving the market

Crude oil is currently the most headline-sensitive of the major commodity markets.

WTI is trading around $84 per barrel, while Brent is close to $90.

The central issue is Iran and the Strait of Hormuz.

Roughly one-fifth of global petroleum flows normally pass through the Strait, making it one of the most strategically important shipping routes in the world.

WTI fell to around $75.77 on 4 August when markets became more optimistic that progress towards a US-Iran agreement could reduce regional tensions and restore more normal shipping conditions.

That optimism faded quickly.

As doubts over an agreement increased, oil recovered above $80 and WTI subsequently traded as high as approximately $84.60.

The physical disruption is significant.

Around 5.5 million barrels per day of Middle Eastern oil production was estimated to have been offline on average during July. That is more than 5% of global oil consumption.

Around 600,000 barrels per day of regional production could also remain offline through 2027, according to current projections.

This is why oil has been reacting so aggressively to every development surrounding Iran and Hormuz.

The market is not simply pricing political uncertainty. It is pricing whether crude can physically reach global consumers.

The US inventory picture provides an important bearish counterweight.

The latest official EIA data showed commercial crude inventories increasing by around 2.5 million barrels to approximately 407 million barrels.

Cushing inventories also rose by around 2.4 million barrels.

More recent preliminary API data indicated an even larger build of around 9.1 million barrels, although that figure should be treated as preliminary until confirmed by official government data.

Refined products tell a different story.

US distillate inventories are around 107.2 million barrels, close to a 30-year seasonal low. Tight diesel availability and refinery disruptions have therefore helped keep refined-product markets firm even while headline crude inventories have increased.

OPEC+ is another bearish consideration.

The group has agreed to an additional production adjustment of around 188,000 barrels per day from September.

In normal conditions, extra OPEC+ supply would place downward pressure on crude prices.

The problem today is that additional production does not fully resolve a logistics crisis. Producing more oil is of limited benefit if shipping routes remain heavily disrupted.

That is why geopolitical risk continues to outweigh some of the more conventional bearish supply signals.

The longer-term risk is demand destruction.

If oil prices remain elevated for long enough, higher fuel costs can weaken consumer demand, increase business costs and eventually slow economic activity. At that point, the same price increase caused by a supply shortage can begin to reduce demand.

Four commodities, four different stories

The recent moves across commodities demonstrate why traders need to understand the underlying transmission mechanism rather than simply watching whether prices are rising or falling.

Copper is being driven by tightening physical availability, falling non-US inventories and structural demand from electrification and technology.

Gold is being driven by weaker US employment, changing Federal Reserve expectations, the dollar, central-bank buying and geopolitical risk.

Platinum is being supported by repeated market deficits, limited inventories and resilient industrial and automotive demand.

Crude oil is dominated by physical Middle Eastern supply disruption and the Strait of Hormuz, with rising US inventories and additional OPEC+ production acting as the main bearish counterweights.

The common lesson is that commodity markets rarely move for one reason alone.

The strongest trading opportunities often emerge when several drivers begin to point in the same direction. Equally, the greatest risks often appear when price momentum looks strong but the underlying fundamentals start to diverge.

For traders, the task is therefore not simply to ask whether a commodity is bullish or bearish.

The more useful question is:

What is driving the move, and is that driver getting stronger or weaker?