Oil Draws Investors Bullishness but Copper Gets Their Undivided Attention

U.S.: After a slump in the second half of 2022, prices for industrial commodities have slowly started to pick up again. This has caused both professional and retail investors to become increasingly bullish about Oil prices in the next six months. Retail traders are more optimistic than their professional counterparts - a sign that reflation expectations are growing in some parts of the commodities market, potentially affecting the Federal Reserve's attempts to keep inflation under control as the economy weakens.

Despite the drop in price of West Texas Oil from $120 to $80 per barrel, investors are showing more optimism for Copper's prospects than for Oil. In fact, a survey of both professional and retail traders revealed that Copper is projected to outpace Oil, Corn, and Gold in terms of potential returns.

A major surge in Copper prices has been observed this year and it might be driven by both short-term and long-term forces. Copper is a cyclical indicator of economic performance, which is showing promise thanks to China's recent reopening.

At the same time, the metal's importance grows as an increasing number of industries opt for electrification analysts believes that within the upcoming years, Copper could become one of the most tightly regulated markets seen before.

If investors' predictions come true, this raises some major macroeconomic questions. One of the most pertinent ones is the effect of commodity price reinflation on consumer prices. The increase in costs could potentially harm the likelihood of inflation returning to the Federal Reserve's goal of 2%, making it a challenge for those wishing for economic stability.

Oil prices also have a bearing on inflation and could result in higher prices for consumers. This created concerns that were discussed by Federal Reserve Chairman Jerome Powell in summer 2022 regarding rising expectations of inflation and its effects.

Most investors in the survey expressed that they have observed moderate evidence of price hikes due to wage boosts. Furthermore, over two-thirds of respondents think that the Fed will reduce rate hikes as goods inflation decreases. Nevertheless, only 43% of 161 sampled expect a decrease in services inflation this year because of lower material goods inflation.