Concerns about demand in the commodity market continue to subside. Last week, developments in global markets, climate-related factors and concerns about production played an important role in the upward trend in commodity markets.
After the inflation data announced in the USA increased below the expectations, expectations that the US Federal Reserve (Fed) would end its “hawk” policies soon rose. While this situation led to the reduction of the recession concerns that have been on the agenda for a long time in the USA, it also highlighted the possibility of a “soft landing” in the country’s economy.
The Consumer Price Index (CPI) in the USA fell below market expectations with an increase of 0.2 percent on a monthly basis and 3 percent on an annual basis in June. In the same period, the Producer Price Index (PPI) in the country was below the projections with an increase of 0.1 percent on a monthly and annual basis. Thus, producer inflation in the USA has fallen to the lowest level since 2020 on an annual basis.
The dollar index, which carried the downward trend for the second week in a row, finished the week at 99.9 with a decrease of 2.3 percent and fell below 100 for the first time since April 14, 2022.
On the other hand, while purchases stood out in the bond markets last week, the US 10-year bond yields finished the week at 3.83 percent with a decrease of about 23 basis points.
Analysts stated that the continuing steps of the Chinese government to support different areas of the economy feeds the risk appetite of investors.
Gold carries its uptrend to its second week
There was an upward trend in precious metals last week.
Gold finished the week 1.6 percent, silver 8.1 percent, palladium 2.3 percent and platinum 6.9 percent.
Gold carried its uptrend into its second week. Analysts stated that the predictions that the Fed may end its “hawk” steps in pricing in money markets, after increasing the policy rate by 25 basis points this month, support the price of an ounce of gold.
There was a rally week in base metals as well.
In the over-the-counter market, copper rose 3.9 percent, lead 2.6 percent, aluminum 5.5 percent, nickel 4.2 percent and zinc 2.2 percent.
With record high temperatures in China’s Sichuan province, the possibility of power outages for metals producers has also highlighted supply concerns for base metals.
A mixed trend was observed in energy commodities.
Last week, a mixed trend was observed in energy commodities.
Brent oil finished the week up 1.8 percent and natural gas traded on the New York Mercantile Exchange fell 1.7 percent.
The International Energy Agency (IEA) evaluated that “oil supply may lag behind demand in the future”.
On the supply side, the voluntary cuts in oil production by Saudi Arabia and Russia in August, and then the news that supply would fall behind demand in the second half of the year accelerated the upward trend of prices.
The US Energy Information Administration (EIA) stated that the expected decline in global oil inventories until the last quarter of next year put upward pressure on oil prices.
While many oilfields in Libya were shut down after protests, Shell suspended crude loading at Nigeria’s Forcados terminal due to a pipeline leak. Recent developments and statements last week that Saudi Arabia and Russia will cut their production indicate that production will be tighter in the oil markets in the coming months.
The barrel price of Brent oil rose as fears that supply would fall short of demand and fears of a recession in the US eased.
A rally week also took place in agricultural commodities
Agricultural commodities were also marked by sharp rises.
In agricultural commodities during the rally week, wheat traded on the Chicago Mercantile Exchange rose 1.6 percent, corn 4%, soybeans 4.2 percent and rice 3.2 percent.
In the Intercontinental Exchange (ICE), cotton increased by 0.2 percent, sugar by 3.2 percent and cocoa by 1 percent, while coffee decreased by 0.8 percent.
The decline in the dollar index after the good US data caused an increase in agricultural commodities.
The rise in expectations for demand coupled with the rise in oil prices affected corn prices upwards.
The increase in soybean imports in China revealed that the demand for soybeans increased. China’s soybean imports increased by 24.5 percent in June compared to the same period last year.
Rice prices soared as importers worried that the hot weather would dry up fields and damage crops as the El Niño began.
According to the World Meteorological Organization, El Niño conditions threaten to bring drought to Southeast Asia, while record global temperatures have raised concerns about the pace of climate change.
The fact that Thailand will face a large-scale drought in early 2024 is a significant threat to rice, while the effect of El Niño and dry air is expected to be seen clearly in September and October. It is stated that the demand for rice for stocking may increase due to the El Nino’s seeming to hang over next year.
On the import side, efforts to build up stock at aggressive rates have begun. With increased shipments to buyers in the Philippines, China and Indonesia, Vietnam expects rice exports to hit the highest level in nearly 10 years this year. Large acquisitions from Indonesia and the Philippines have affected the market upwards.
The China Meteorological Administration indicated that heat waves are likely to continue in many parts of southern China.
While the strong demand for chocolate supports cocoa prices, the dollar-based sales of chocolate during the 52 weeks ending on May 27 increased by about 10 percent compared to the same period of the previous year, according to Nielsen data.
In the coffee market, the expectations that there will be excess production caused a depreciation in prices.