EW-COMMODITIES OUTLOOK - MAY 2026

This month’s analysis centres upon the growing divergence and now imminent re-synchronisationbetween key commodity sectors, with ratio analysis providing the clearest forward-looking signal. In particular, the Copper/Crude oil ratio emerges as the dominant analytical tool, offering a unifying framework through which the apparent inflationary distortions linked to the Middle East conflict can be interpreted, and more importantly, resolved.

The Middle East conflict has quietened down during the past two weeks as both sides debate conditions to end the war. One of the main sticking points is the U.S.’s insistence that Iran abandons its nuclear enrichment programme with Iran equally adamant that it intends to continues – the ceasefire agreement is loosely held together with the Straits of Hormuz closed to shipping – and that’s held up the price of Crude oil whilst Central bankers are playing out a wait-and-watch situation, with five CB’s meeting this week, although none are expected to hike interest rates, something the markets are nervous about, especially since any prolongation of the conflict is seen as inflationary.

On a straightforward fundamental basis, analysts and financial pundits alike are all guessing how long the conflict will continue and what effects it will have on the global economy.

Just today, Goldman Sachs has warned that oil could trade at nearly $120 a barrel later this year of the conflict drags on – well, that’s like saying you’ll get wet if it rains – pretty obvious! – the big question is whether it will drag on, or not!

This month’s report is entitled ‘Copper/Crude Oil Ratio – Confirming Middle East Unwind’ – whilst we’ve been updating this ratio for the past few months, latest data suggests it’s preparing for a reversal following sharp declines over the last months – that reversal would push the ratio significantly higher over the next several months, showing relative outperformance for Copper, underlying underperformance and importantly, weakness for Crude Oil – so this is forewarning that big Crude Oil prices declines are on the horizon.

Ratios seem to be an important theme this month because the Gold/Silver ratio is also confirming directional declines in both gold and silver – especially silver.

We know with some conviction that the gold/silver ratio is also linked to directional trends and counter-trends of gold and silver bullion. When gold and silver peaked last January, an inverse bottom occurred in the gold/silver ratio – as gold and silver bullion then began sizable corrective declines, so the ratio pushed strongly higher in five waves – that five wave advance reflects silver’s underperformance but it also unfolded when silver correspondingly declined in five waves from January’s high. 

A correction has followed in the gold/silver ratio, just ahead of another big five wave advance – that translates into another but inverse five wave decline in bullion silver – and gold too – which is already underway. And that’s very much a contrarian forecast because just last week, Wall Street analysts turned bullish for gold, citing its long term uptrend remained intact.