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Commodity Markets Continue Dealing With Selling Pressure

12.02.2024 12:57

Fed’s statements on easing monetary policy to be later than expected cause increased selling pressure in commodity markets.

Commodity markets were recently on a positive trend, but selling pressure persists in the markets due to uncertainties over the Fed's monetary policy, concerns about the global manufacturing industry, and the increase in demand for the US dollar.

Commodity markets were on a downward trend last week, as the Fed Chairman Jerome Powell signaled the easing in monetary policy to be later than market expectations, along with other Fed officials' statements conforming with, and it resulted with increased selling pressure.

The cooling of inflation and labor markets may make a rate cut appropriate, and if the disinflation comes to a pause, it may be appropriate to keep the policy rate unchanged for a longer period, noted Adriana Kugler, member of the Fed's Board of Governors.

More data is needed before supporting a rate cut and that it would be appropriate to start easing monetary policy before the end of the year, said Susan M. Collins, head of the Fed of Boston.

Thomas Barkin, CEO of the Fed of Richmond, underlined the need to be patient to tackle inflation, as they would like to see if further inflationary pressures come to play.

Inflation has made good progress but there is still a long way to go, said Raphael Bolstic, the president of the Fed of Atlanta.

Lorie Logan, CEO of the Fed of Dallas, emphasized that there is no urgency to adjust interest rates, as confidence on inflation needs to be established.

Platinum surpasses palladium for 1st time since 2018

The signs of economic activity remaining strong led to a stronger selling pressure in bond markets in the US, as the ounce price of gold fell week-on-week due to rising bond yields.

The price of palladium carried on going down on expectations of stable supply and continued demand.

As for the price of platinum, it went above the price of palladium for the first time since 2018, as it completed the week priced at $877.10, whereas palladium finished at $862.84.

In light of this news, the ounce price of gold decreased 0.7%, silver 0.2%, platinum 2.1%, and palladium 9.2% last week.

As for the base metals, the inflation data in China and the decline in industrial production in Germany revealed declines across the board.

The Consumer Price Index (CPI) for January went down by 0.8% year-on-year and the Producer Price Index (PPI) by 2.5% in China.

Meanwhile Germany's industrial production plummeted by 1.6% month-on-month in December, above expectations.

Given these changes, copper ended the week with a loss of 3.4%, lead 4.2%, aluminum 0.9%, nickel 1.4%, and zinc 6.4%.

The news that Israeli Prime Minister Benjamin Netanyahu would turn down a possible cease-fire with the Palestinian resistance group Hamas caused the risks in the Middle East to increase, influencing oil prices go upward.

The US Energy Information Administration had announced that gasoline stocks in the country decreased by more than 3 million, which signaled that the demand appetite continues, causing Brent crude oil prices to rise.

Considering this news, the price of Brent crude oil soared 5.6%, whereas the natural gas traded on the New York Mercantile Exchange lost 10.5% last week.

Agricultural group see mixed course

The rise and the concerns of demand in the US Dollar Index caused wheat and corn prices to go downwards.

So, the price of wheat traded on the Chicago Mercantile Exchange dropped 0.3%, corn 3.1%, soybeans 0.4%, whereas the price of rice climbed 2.6% last week.

Cocoa prices continue to peak amid concerns that the cocoa deficit will increase further, while cotton prices increased amid concerns over the Chinese economy, as the intense cotton consumption in the country continues.

Sugar prices were influenced by Safras & Mercado, a leading agricultural consultancy in Brazil, as it lowered its sugar cane crushing forecast for 2023-2024 from 670 million tons to 650 million tons.

In light of these developments, cotton traded on the Intercontinental Exchange hiked 3%, sugar 0.4%, and cocoa 11.8%, hitting a record of $5,798 per ton, while coffee went down 0.4% last week.

Writing by Emir Yildirim -

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