ISTANBUL
Commodity markets saw a slight upward trend last week despite the postponement of the Fed’s rate cut expectations, as the economic activity persisted strongly in the US, and China-induced increases and persistent geopolitical risks contributed to the rise in commodities.
After the US inflation data exceeded expectations, estimates that the Fed may start cutting interest rates later gained strength, analysts said.
Ounce price of gold negatively affected last week
The US Dollar Index’s seventh consecutive uptick was notable last week, as it tested an almost three-month high by rising to 105, and it closed the week at 104.3, up 0.2%.
The US 10-Year Bond Yield went up by about 12 basis points and ended the week at 4.29%, as the sales-weighted course continued in bond markets after inflation data exceeded expectations.
As for the ounce of gold, the index tested below $2,000 for the first time since December, continuing its downward trend for the second consecutive week now, as the demand for US dollar continued to increase, high bond yields increased the alternative cost of gold, and the inflation in the US exceeded expectations, closing the week at $2,012, down 0.6%.
The demand for silver hiked especially due to the Chinese New Year, and palladium saw reaction buying last week after sharp declines.
In light of these developments, despite the decline in gold last week, silver gained 3.6%, palladium 10.2%, and platinum 4%.
The US Philadelphia Fed Manufacturing Index rose to 5.2 in February, signaling an expansion in the sector after a five-month contraction. The index, announced by the New York Fed, soared by 41.3 points to minus 2.4 in the same month, above expectations, indicating that the outlook for demand in metals improved.
Retail sales in the US fell more than expected, raising hopes that the Fed may start cutting interest rates in the second quarter, which in turn pushed copper prices higher.
Australia is preparing broader policy support for Australia's green energy industry and classifies nickel as a “critical mineral,” which has had a positive impact on nickel prices.
Demand for metals may continue to rise after the Chinese New Year, analysts say.
Given these changes, copper ended the week with a hike of 3.8%, lead 1.6%, aluminum 0.1%, nickel 2.7% and zinc 3.7%.
The rising tension in the Middle East due to the Israel-Palestine conflict continues to impact oil prices.
The Iranian-backed Yemeni political organization, the Houthis, announced that they hit the British vessel named LYCAVITOS with “a number of suitable naval missiles” in the Gulf of Aden.
The attack was carried out in support of the Palestinian people and that more measures would be taken to respond to the US and UK attacks on Yemen and to support Palestinians, Yahya Saree, Houthi military spokesperson, said in a statement.
Natural gas prices fell on declining demand and increased production in mild weather.
Given this news, Brent crude oil rose 1.4% last week, while natural gas traded on the New York Mercantile Exchange lost 12.9%.
Agricultural group saw downward trend last week
Wheat production forecasts increased by 830,000 tons to 785.74 million tons as per the estimates for the 2023/24 season, according to the US Department of Agriculture (USDA).
Rice production worldwide soared by 200,000 month-on-month to 513.74 million tons, as reported by the USDA production estimates.
The rise in oil prices, as well as rising expectations for demand, led to a rise in corn prices.
In view of these developments, the price of wheat traded on the Chicago Mercantile Exchange last week plummeted by 6.3%, soybeans 0.5%, rice 3.2%, while the price of corn hiked 0.1%.
Cotton production estimates worldwide decreased by 360,000 bales to 112.82 million bales, based on the USDA’s estimates, causing prices to go up.
The International Coffee Organization (ICO) estimated a production surplus of 1 million bags in the 2023/2024 season, leading to a drop in coffee prices.
News that ethanol production is preferred over sugar in Brazil also caused sugar prices to drop.
Cocoa prices also fell last week on concerns that record-high prices could dampen demand.
Considering these changes, cotton traded on the Intercontinental Exchange saw an uptick of 2.4%, cocoa 4.8%, sugar 3.2% and coffee 2.8%.
*Writing by Emir Yildirim
