Source: Seeing the Big Picture from Small Details

 JPMorgan Global Markets Strategy: What Signals Are Commodities Sending Us? February 5, 2026

The chaotic start to February raised a question: Is the volatility in commodity markets a harbinger of future trends, or merely a correction?

We believe this is a healthy correction rather than a trend reversal, providing a buying opportunity for metals, while expecting further declines in the energy sector.

Despite the recovery in global growth and the shift in manufacturing activity, which is supporting demand, the divergence between energy and metals stems primarily from differing supply dynamics.

Prices for all commodities, from gold and silver to copper and Bitcoin, plummeted on Friday in the most significant market turmoil since November of last year. Gold experienced its biggest single-day drop since 1983, falling more than 9%, while silver plunged 26%, marking its largest single-day decline on record. Grain and livestock futures also collapsed due to the volatility in the precious metals market.

The sell-off continued into Monday, putting pressure on energy markets: global natural gas prices collapsed, and oil prices suffered their biggest drop in six months. The sell-off in precious metals accelerated after exchanges in the US and China raised margin requirements, compounded by a seasonal sell-off ahead of the Lunar New Year.

Overall, commodities lost nearly 8% in a brutal three-day plunge, with U.S. natural gas prices plummeting 57%, silver down 33%, gold down 13%, and copper and oil both falling 7%. This sharp volatility continued into the middle of the week, with prices rebounding before falling again due to choppy trading (Figures 1 and 2). The commodity decline dragged down U.S. stock index futures, while Asian stocks suffered their worst two-day drop since last April on Monday.

Figure 1: Year-to-date performance of gold, silver, copper, and Brent crude oil prices.

Figure 2: 10-year z-value of cross-asset volatility

This week’s chaotic start raises the question: Is the commodity sell-off a harbinger of future trends, or just a correction?

We believe this is not a turning point, but a healthy correction, a buying opportunity for metals, while energy will see more selling.

1. The first argument revolves around the global growth recovery.

Since the fourth quarter of last year, global markets have seen a clear pro-cyclical rotation, reflected in the metals, stock, and foreign exchange markets. This recovery is a direct result of the following factors:

• Less restrictive monetary policies in developed countries (Figure 3)

Expansionary fiscal policies in most major economies. In the United States, the Congressional Budget Office predicts that legislation such as the "Good Things Come In" package will boost U.S. growth by 0.9%. Expansionary fiscal policies are not unique to the U.S. The International Monetary Fund estimates that fiscal measures will boost Germany's growth by 1% and Japan's by 0.5% in 2026. Ultimately, fiscal policies in the G3 economies will be highly expansionary in the coming quarters.

With the headwinds from the trade war and immigration restrictions receding, there are significant upside catalysts for US growth and inflation. Strong spending on artificial intelligence and data centers, along with high AI stock prices, is boosting the wealth effect for consumers. Additional tailwinds include a weaker dollar and (until recently) lower oil prices, as well as economic stimulus from hosting the World Cup and events related to the 250th anniversary of the founding of the United States.

The “Good Things Package” further supports the outlook by cutting taxes on overtime pay and consumer spending, increasing the child tax credit, and extending the full expense of equipment and factories. These measures are increasing household tax refunds and driving a capital spending boom (Figure 4).

Figure 3: Official Policy Interest Rates in Developed Countries

Figure 4: U.S. Non-Defense Capital Goods (excluding aircraft) Expenditures

2. Global manufacturing activity is shifting

Recent PMI data confirms that the global growth rebound is underway and expanding, supported by global monetary easing and a surge in technology investment, with the increase in the number of economies reporting output increases being particularly encouraging. In developed markets, the US recorded its strongest ISM manufacturing data since August 2022, Japan saw significant improvement, and Western Europe also strengthened markedly. While China's output PMI remained largely unchanged, this key indicator from emerging Asia (excluding China) saw substantial growth. Overall, global PMIs are operating at a solid, above-trend pace, with increased new orders providing a constructive signal for the sustainability of the recovery.

3. Given the reassessment of global growth, the reflation trade for 2026 has begun, with commodities, materials, and industrial stocks performing well.

Based on the historical relationship between copper prices and the global manufacturing PMI over the past fifteen years, the recent surge in copper prices suggests a PMI reading close to 53—significantly higher than the latest figure of around 50.5, and more optimistic than any other cyclical sensitive market we track. While copper's year-over-year performance may exaggerate pro-cyclical optimism in the market, other markets also clearly exhibit a degree of optimism. For example, a simulated semiconductor stock basket (showing similar explanatory power over the same period, with an R-squared of approximately 0.42) suggests that the PMI will rise to around 52 by the end of Q1 2026. The continued bullish trend of this stock basket after breaking out of its multi-year range indicates that the pro-cyclical component of the market trend remains strong despite the recent short-term reversal in the metal (Figures 5 and 6).

Figure 5: Copper Prices and Global Manufacturing PMI

Figure 6: Semiconductor Stock Basket and Global Manufacturing PMI

4. However, the similarities within commodities end there.

Last week's sharp correction in precious metals prices was triggered by a rebound in the US dollar (following Kevin Warsh's nomination as the next Federal Reserve Chairman), but the severity of the pullback was more due to the rapid liquidation of massive long positions that had been built up quickly after the unsustainable acceleration and overextend of prices in the previous two weeks. In short, prices went too far and too fast, with short-term momentum indicators surging to levels rarely seen in the precious metals market.

In contrast, the 11% rise in Bloomberg energy prices since the beginning of the year has been driven by temporary factors such as weather and escalating geopolitical tensions. Large-scale winter storms and freezing temperatures in parts of the U.S. disrupted production and boosted demand for heating fuels, while cold weather in Europe disrupted oil loadings and depleted natural gas inventories. However, the most significant impact on oil prices has been the escalation of tensions with Iran, an effect we expect to be short-lived given that this is a U.S. midterm election year.

Despite the current volatility, we remain bullish on gold and copper, while maintaining our outlook for lower energy prices – this divergence is primarily driven by differing supply dynamics.

5. Remain bullish on gold; the fundamental peak for copper is still to come.

We remain bullish on gold. As we've seen over the past six months, this long-term rally in gold has not been linear, nor will it be in the future. We still view such pullbacks as healthy and necessary, and not a challenge to our structurally bullish view. In fact, we've already seen physical bargain hunting as gold remains a dynamic, multifaceted portfolio hedge with a clear structural story.

In addition to recent support from retail investors, we continue to expect central banks to remain steadfast as important bargain hunters. We now forecast that official net purchases of gold this year will reach 800 tons, still 70% higher than pre-2022 levels (Figure 7).

Overall, we continue to see room for gold diversification, as demand from central banks and investors this year is expected to be sufficient to ultimately drive gold prices to $6,300 per ounce by the end of 2026, given that physical assets continue to outperform paper assets (Figure 8).

Figure 7: Central Bank Quarterly Gold Purchases

Figure 8: Investors hold approximately 3.2% of their AUM in gold.

More caution is warranted regarding silver due to the risk of short-term two-way overshooting.

Silver is a smaller, more volatile market than gold, and lacks central banks as structural bargain hunters. We are more concerned about a potentially deeper correction in the short term. Thursday's price action (silver fell approximately 10% at the time of writing) clearly illustrates this risk. While we do not believe that gold and silver prices will completely decouple or decorrelate in the medium term, we do think that silver's current relatively high valuation compared to gold faces the risk of a larger correction on days when the precious metals sector as a whole is under pressure.

Nevertheless, while we believe that re-entry requires more caution compared to the clearer pattern in gold, we still believe that silver has a relatively high bottom in the short term (around $75-80 per ounce in the next few quarters) and that the price will eventually recover to around $90 per ounce on average by early next year, because even if silver has overshot its gains in catching up with gold, it is unlikely to completely abandon its gains and decouple from its sister metal.

Bargain buying is currently supporting copper prices; the fundamental peak is still brewing.

Copper has also been caught up in the recent metals frenzy, briefly breaking through $14,000 per tonne last week before falling back along with other commodities in the sector. While the current weak fundamentals do not support the previous surge, we still believe there is significant potential for further dislocation in the copper market and a more bullish trend in the coming months (Figure 9).

We still believe the Trump administration is most likely to implement phased tariffs on refined copper imports, announcing its intention around mid-year, with the tariffs taking effect in January 2027. This, in turn, would reopen the COMEX/LME arbitrage window, attracting significant copper imports to the United States once again.

Furthermore, since we believe that the weakness in Chinese demand over the past few months was mainly a delay in demand (trying to wait for prices to fall) rather than a more worrying structural slowdown in Chinese end-consumer spending, we anticipate a scenario where Chinese consumers may ultimately need to accept higher prices later this year in order to attract the copper they need back to the country.

Figure 9: Global Visible Copper Inventories

Figure 10: Weekly Return of LME Three-Month Copper under Different LME Registered Warehouse Receipt Inventory Environments

The potential for combined demand from the US and China around mid-year continues to tilt the risk toward LME copper inventories falling to extremely low levels later this year, potentially driving spot prices sharply higher than our baseline quarterly average of $12,500 per tonne in Q2 2025, and possibly toward $15,000 per tonne and above as the LME curve moves into a deep cash premium (Figure 10).

At the same time, given this risk, the high level of concern for supply security, the necessity of copper and other key minerals for the supply chain, and the broader pro-cyclical investor preference, the willingness to buy copper on dips remains strong, and a bottom has been established for prices at around $12,500 per tonne.

6. Oil prices include a geopolitical premium of $7 per barrel and should fall back to fair value.

The severe cold weather reduced supply and increased oil demand, adding a premium of about $2 per barrel to oil prices in the last week of January. Production in Kazakhstan and the United States is now fully restored within days, and Russian exports are also nearing normal levels. However, oil prices are still about $7 per barrel above fair value, a premium almost entirely attributed to the escalation of tensions between Washington and Tehran, January 29, 2026 (Figure 11).

Following weeks of confrontation, including the U.S. military shooting down an Iranian drone near a U.S. aircraft carrier and the Iranian navy harassing merchant ships, the two sides agreed to resume indirect talks in Oman on Friday. Iran insisted that discussions should be strictly limited to the nuclear issue, while the U.S. pushed for a broader agenda involving limiting Tehran's ballistic missile arsenal, ending its support for regional proxies, and the treatment of its people.

Figure 11: Polymarket's prediction of the probability of a US strike on Iran before March vs. Brent crude oil price

President Trump has issued a blunt warning to the Iranian leadership and deployed significant U.S. troops to the region, increasing concerns about escalation, despite calls for diplomacy and warnings from Gulf states and other regional powers against war. The Iranian leadership, grappling with a severe domestic economic and social crisis, appears willing to engage in "fair and just" negotiations, but core differences remain.

Given high US inflation and this year's midterm elections, we expect this confrontation will not lead to a lasting disruption to oil supplies. If military action does occur, we anticipate it will be targeted, bypassing Iran's oil production and export infrastructure. While short-term geopolitically driven oil price rallies may persist due to the region's proximity to major energy transport chokepoints, these should eventually subside, leaving a potentially weak global market fundamentals.

We forecast strong demand growth this year, but expect global supply to grow at three times the pace of demand, with half of that growth coming from non-OPEC+ producers – driven by robust offshore development and the continued momentum of global shale gas.

7. Natural Gas – It’s a cold winter (and position adjustments)

January saw a perfect storm hit the global natural gas market, sending gas prices on a rollercoaster ride. The month was characterized by rapidly changing weather forecasts, coupled with historically low inventory levels and position adjustments by European investors, further accelerating price volatility. The February TTF contract settled at €40.1 per megawatt-hour – a 40% surge from January and nearly 50% above the recent low of December 16, 2025. Meanwhile, the February Henry Hub contract settled at $7.46 per million British thermal units (MMBtu), more than doubling in just seven trading days to reach its highest level since 2022.

European natural gas prices surged to a one-year high, a result of cold weather, depleted inventories, and market positioning. TTF prices had previously hit recent lows in mid-December as market expectations for another warmer-than-normal winter and optimism surrounding new LNG supply in 2026 led to—we believe—complacency. This sentiment was reflected in investor behavior: positions turned net short for the first time since March 2024, with short positions increasing throughout December to reach -93 million megawatt-hours, the lowest level since 2020.

However, the narrative shifted as weather patterns became unstable, with the expected number of heating days in January rising from the second week of the month (Figure 12). TTF prices surged due to extremely low inventories and increased demand for natural gas for heating and power generation (Baby, It's Still Cold Outside, January 13, 2026). Prices stabilized around €40/MWh, supported by the prolonged cold snap in the US and concerns about disruptions to US LNG supplies caused by production freezes, surging domestic demand, and severe storms. As the weather outlook on both sides of the Atlantic returned to normal, the March TTF contract fell from €39.3/MWh on January 30 to around €33/MWh on February 3 (Figure 13).

Figure 12: TTF prices are susceptible to changes in weather forecasts...

Figure 13: ...and accelerated due to investor position adjustments.

U.S. natural gas joined the rally later this month as a cold snap swept the country. Prices started the month relatively low, with the February contract trading below $4 per million British thermal units (MMBtu), falling to $3.10 on January 16 before surging to settle at $7.46 on January 28. During this period, January HDD forecasts jumped sharply from around 900 HDDs to 985 HDDs, exceeding both the 10-year average of 891 HDDs and the 30-year average of 933 HDDs. The cold weather expectations also carried over into February, with forecasts rising from 771 HDDs on January 19 to a peak of 840 HDDs on January 30.

However, weather expectations changed significantly this week, shifting towards warmer conditions. In response, prices retraced sharply lower, with the March contract falling from $4.03/MMBtu on January 30 to $3.25/MMBtu at the time of writing (Figure 14).

Figure 14: Henry Hub prices in the United States are primarily driven by weather expectations.

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