Reprieve for commodities may prove short-lived

Commodity prices rebounded a little this week as the EU and US agreed to hold off on any additional tariffs while trade negotiations are underway. However, prices may struggle to hold on to these gains as this temporary truce could easily fall apart. Next week, the focus of commodity markets may return to data on economic activity. The prices of industrial metals could take a hit early in the week as we expect both the “official” (Tuesday) and Caixin (Wednesday) China manufacturing PMIs to have fallen in July. Meanwhile, the price of gold is unlikely to be moved by the FOMC meeting, which concludes on Wednesday, as policy is almost certain to be left unchanged. However, gold could slip back again on Friday if, as we expect, there is a strong non-farm payrolls number in July’s US employment report, which would pave the way for a September rate hike.