Commodity Compass - 8/1 - Tin Remains a Standout in the Commodity Trade

Kevin Warsh took the stage at Jackson Hole today — and left little doubt the Fed still believes it has work to do on inflation. Gold tumbled more than 3 percent on the day as the odds of a September rate hike climbed back toward a coin flip. And in the ag space, wheat exploded to a three-year high, posting its biggest weekly gain since 2022.

On Wednesday, with the 30-year yield sitting at a 19-year high, Treasury Secretary Scott Bessent announced the government would at least double the size of its long-term debt buybacks from two billion to at least four billion dollars per operation and targeting the 10-to-30-year part of the curve. This happened the same day, Treasury confirmed the national debt had crossed forty trillion dollars for the first time. Yields dropped on the news — and then promptly reversed. Within a day, the 10- and 30-year had erased the entire move and pushed higher than before Bessent spoke, forcing him back in front of the cameras to insist four billion is a floor, not a ceiling, and that yields - quote - "don't reflect the underlying fundamentals." The market's verdict, from a JPMorgan note, was blunt: interventions like this belie the structural challenges and do nothing to address them. Translation — a widening deficit, sticky inflation, and a wave of AI-driven corporate issuance are the real story, and a bigger buyback fixes none of it. For gold, that's about as clean a bull signal as you'll find, and it shows up all over the board.

The market is still working off the summer doldrums — thin, low-conviction trading — and this week's data did little to break the spell. The big commodity story this week was in Washington. On August 7th, the President convened a roundtable of mining executives at the State Department — Rio Tinto, BHP, Freeport, MP Materials among them — and rolled out more than two billion dollars in new critical-mineral deals alongside it. The framing was blunt — cut the dependence on China, and replenish the defense stockpiles drawn down during the Iran conflict. It's the clearest signal yet of just how much public capital is about to hit this space.

The Federal Reserve held rates again this week — and it was the press conference, not the decision, that moved markets, driving long-term Treasury yields to their highest since 2007. Halfway around the world, Japan stepped into the currency market to rescue the yen from a forty-year low, and the Bank of Japan held the line hours later. And with crude back above eighty dollars, the Middle East keeps simmering under all of it.

The escalation in the Middle East did not pause this week — it expanded. Iran and the United States continue to apply military pressure throughout the Gulf, and the Houthis appear to have opened a second front, with activity threatening Saudi shipping lanes in a separate strait. Oil has now posted back-to-back double-digit weekly gains — fifteen and a half percent last week, ten percent this week — taking WTI from the high sixties to above ninety dollars in just two weeks. Brent is within striking distance of one hundred dollars per barrel.

Two macro forces defined the week. Iran and the United States escalated military pressure throughout the Gulf. The ceasefire that markets spent six weeks pricing in showed new cracks, and oil reversed its entire recent descent in a single week. And on Wall Street, the AI momentum trade that powered equities higher through the spring finally hit the summer wall. Rotation out of tech accelerated as summer volume thinned the market’s natural buyers. The physical commodity trade and the financial equity trade moved in opposite directions this week — both driven by the same underlying competition for energy and resources.

This week delivered a stark reminder that the Hormuz saga is not over. Two days of direct US-Iran clashes mid-week threatened to unravel the ceasefire that markets have been pricing in for the past six weeks. Bloomberg reported Thursday that peace talks are continuing despite the hostilities — a U.S. official confirmed negotiations remain active. Oil steadied by Friday and finished the week higher. But the International Energy Agency added important context to the week's volatility: renewed hostilities, the agency warned, risk undermining efforts to rebuild the depleted global oil inventories that have been draining since the crisis began. Even if a deal eventually gets done, the physical damage to supply buffers is cumulative. Every week without a resolution is a week of inventory destruction the market will eventually have to price back in.

It's a short week heading into the Fourth of July weekend and the markets treated it accordingly, with lower volume and decisive price moves driven more by a macro narrative than fresh data. The Iran deal remains unsigned. Supreme Leader Khamenei has not publicly committed. But the cumulative weight of optimism across the past six weeks haspushed WTI down nearly thirty percent from its monthly highs, pricing in a resolution the physical market has not yet confirmed. This week's jobs report added a second macro headwind: payrolls came in below expectations, reinforcinga picture of a U.S. economy that is absorbing the energy shock unevenly — gas prices have come down meaningfully, giving consumers some relief, but the broader labor market is softening.

The dominant force on the board this week didn't come from a commodity market at all — it came from the AI trade, and the doubt that suddenly crept into it.On Tuesday, a wave of selling hit the semiconductor and memory names that have led this market all year. Micron fell double digits, Marvell, Sandisk, and Arm dropped sharply alongside it, and even Nvidia gave up around four percent. The tech-heavy Nasdaq closed down 2.2 percent — its worst session in weeks. And the trigger wasn't a bad earnings report. It was a question: whether the hundreds of billions of dollars in debt-funded AI infrastructure spending is actually going to pay off — and what a more hawkish Federal Reserve does to that math. Following Kevin Warsh's debut, traders have swung from pricing rate cuts a few weeks ago to now pricing the risk of another rate hike by December. The fear gauge popped, money rotated into defensive corners like staples and healthcare, and the tape steadied into midweek.

Kevin Warsh held his first press conference as Chair of the Federal Reserve, and he used the debut to push back against the market's expectation of summer rate cuts. The read coming out of that room was unmistakably hawkish — a Fed in no hurry to ease, signaling that it intends to keep policy tight until it is convinced the inflation fight is finished. The dollar firmed in response, real yields pressed higher, and the rate-sensitive corners of the commodity complex — precious metals first and foremost — took the brunt of it. Gold, silver, and platinum all closed the week lower.