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EW-COMMODITIES OUTLOOK - March 2020 - Base Metals Heading for Major Lows in Q2 2020 – Inflation-Pop Uptrend Cycle On-Track Thereafter – Gold to Begin Corrective Downswing - Crude/Brent Oil Continuing Corrective

In This Edition: This month’s Elliott Wave Commodities report updates the latest price developments for key benchmarks, Copper, Gold and Crude oil following steep declines during February’s stock market plunge.

The coronavirus COVID-19 has spread from its epicentre in Wuhan city, China to other Asian regions with South Korea and Japan particularly effected with the former reporting cases of over 5,800, the largest outside of China. But Europe is now reporting an alarming increase of contagion. Italy has taken emergency steps by closing schools, public offices and transport in its industrial hubs in the north as coronavirus cases increase to 1,694. The virus has also reached the shores of the U.S. although somewhat limited so far with reported cases at 88.

U.S. stock markets have declined by -16% per cent in just over a week as investors grow increasing worried over the spread of the coronavirus. Central bankers have consequently reacted to the plunges in global exchanges by soothing investors with promises to add liquidity and even cut interest rates. This has helped flip stock markets and commodities higher into the first few days of March by +8.6% per cent – but will it be enough? – will it last?    

The International Monetary Fund has lowered global growth expectations along with a myriad of investment bank analysts. Economists have long-warned of a recession as interest-rate yield curves have been inverted for the best part of 14-months. Does this suggest a long, protracted decline for the world’s commodities? – Is gold going to remain the best safe-haven asset following a strong gain of +21% per cent in 2019?

This month’s report begins with examining the US$ dollar. Declines from the late-February high of 99.91 have been large enough to confirm the 2-year counter-trend upswing has completed – the next phase of the 7.8-year cycle downtrend is confirmed underway. The US$ dollar is having less impact on declining commodity prices at this precise stage as the impact of the coronavirus dominates the global slowdown of economic activity.

Base Metals have been engaged in a 2-year counter-trend downswing but are approaching major downside targets. This means the coronavirus impact will last for another couple of months, but then end at the same time base metals form major lows.

Precious Metals, especially gold has attracted safe-haven buying interest as a carry-over from last year’s gluttonous advance. February’s high of 1689.63 marked the completion of a five wave impulse pattern from the Aug.’18 low of 1160.24 which opens the way for a multi-month corrective downswing to begin, despite the latest sentiment indicators showing extremes of bullishness. Silver and Platinum have declined since forming important highs last September and more recently, in January – both are heading lower. Palladium has formed an important peak at 2789.80.

Crude oil is watched as a leading indicator for the health of the global economy. Since Oct.’18, Crude/Brent oil have been declining into a corrective A-B-C zig zag pattern. Downside targets for wave C are below the Dec.’18 lows of 42.36 and 49.93. That seemed an improbable downside forecast back in early January when Crude oil was trading at 65.65 – but prices have since sunk to 43.48 and Brent oil to 48.41, marginally below the Dec.’18 low. Going forward, these recent declines remain incomplete but heading towards completion.