Commodities Focus: The impact of the Turkey crisis

Industry analyst Rajan Dhall discusses where investors should expect oil, gold and copper prices to move this week.

Many of the themes in commodity markets have stayed the same during the summer months, such as OPEC supply increases and tariffs from the US.

There's now a new protagonist with the potential to cause a supply disruption in certain markets. Turkey's economic crisis means there is now a significant amount of risk attached to the region.

According to worldexports.com, gems and precious metals account for $10.9 billion (6.9%) of exports out of Turkey and iron and steel make up around $8.2 billion (5.2%). This is a significant amount, while there are also UK listed companies that have operations there. 

An interesting development over the last few weeks is the usage of Iranian oil by China and Turkey, both of which are locked in trade battles with the US.

President Trump has recently stated that anyone who co-operates with Iran will be subject to harsh measures from the US, but Europe has also said they are still willing to trade with Iran after the US left the nuclear deal.

From an oil chart perspective, you can see we are making a new wave low, the market has started to stall and has recently rejected the $66.70/bbl level.

We may see a move back up if the trendline support is rejected but $70/bbl is a target price for the market. 

Copper prices have been supported at the previous mean value area of around $2.70/lb as reports circulate of another strike at the world's largest copper mine Escondida in Chile.

Short positions in the latest CoT report data show bearish bets are rising, although some analysts are suggesting this may be overdone - despite the trade wars the fundamentals of the market remain strong.

Elsewhere, the chart is showing that the old value area is providing support and if we hear any news that the talks in Chile are going well I think we could see a move back toward $2.50/lb.

Gold remains an anomaly. If there is a massive threat of contagion from the situation in Turkey then surely the yellow metal should see (at least) some safe haven flow?

The market is still preferring the US fixed income markets as yields rise. If the banking system is hit, then traditional safe-haven assets such as precious metal could make a comeback but the chart suggests otherwise as the trend continues south.