The commodity market followed a positive course last week, with the verbal guidance of the US Federal Reserve (Fed) Chairman Jerome Powell and the news that the Chinese government will support the economy.
The US Federal Reserve (Fed) Chairman Jerome Powell, in his speech at the Jackson Hole Economic Policy Symposium, emphasized that they are ready to raise interest rates further if appropriate, and news flows that the government will support the economy despite growing concerns about the Chinese economy last week in the commodity market. positive trend was observed.
Stating that core inflation is still high on an annual basis, Powell underlined that there is still a long way to go in order to return to price stability.
In the week where the verbal guidance of the Fed members was followed, Philadelphia Fed President Patrick Harker stated that he did not see the need for additional interest rate hikes at the moment, while Cleveland Fed President Loretta Mester drew attention to the fact that they needed to see more evidence that inflation has cooled.
With these developments, it is priced in the money markets that the Fed will keep the policy rate constant with an 81 percent probability at its September meeting and will increase the interest rate by 25 basis points with a 19 percent probability.
On the other hand, in the week of fluctuations in US bond yields, 30-years ended the week with a decrease after testing the peaks of the last 12 years and 10-years of the last 16 years, with purchases from these levels.
Dollar/yuan parity made the highest weekly close since December 2007
Increasing concerns about the Chinese economy and expectations about the Chinese government’s steps to support the economy continue to affect asset prices.
In addition to the negative signals of the manufacturing industry data announced in the country, the decline in the Producer Price Index (PPI) and the Consumer Price Index (CPI) simultaneously for the first time since 2020 triggered deflation concerns in China.
Analysts stated that weakening global and country-wide demand increased concerns about economic activity, but expectations that the Chinese government would support all areas of the economy remained warm.
Although the People’s Bank of China (PBoC) continued to support the yuan against the dollar, the increasing risk perception in the country caused the dollar/yuan parity to be traded at the peak of the last year.
Last week, as the Chinese officials’ statements to calm the markets were observed to have an impact on asset prices, the PBoC continued to make the strongest interventions in its history through public banks to prevent the depreciation of the yuan.
The dollar/yuan parity, which carried its upward trend for the fourth week in a row, completed the week at 7.2898 with an increase of 0.1 percent and realized the highest weekly close since December 2007.
Gold ends 4-week bearish streak
Last week, precious metals, except palladium, stood out.
Gold closed the week with 1.31 percent, platinum 3.8 percent and silver 6.5 percent, while palladium decreased 2.4 percent. Thus, the ounce price of gold ended the 4-week downward trend.
Analysts, referring to the inverse correlation between the 10-year bond rates of the USA and precious metals such as gold and silver, said that the 10-year bond interest started to decline after testing the peak of the last 16 years, and this situation had a positive effect on gold and silver demand.
In the energy group, the barrel price of Brent oil, which carried the downward trend for the second week in a row with increasing recession concerns worldwide, especially in the Chinese economy, closed the week with a decrease of 0.3 percent, while natural gas traded in the New York Commodity Exchange followed a horizontal course.
Base metals also dominated the positive course
In the over-the-counter market, aluminum gained 0.8 percent, nickel 2.9 percent, zinc 2.9 percent, copper 1.6 percent and lead 1.7 percent.
Reminding that the concerns about economic activity continue in China, which is the world’s largest supplier country, analysts stated that the positive trend in base metals came to the fore with the effect of the news flow that the Chinese government will support the economy.
A positive trend was also observed in the agriculture group, excluding corn and wheat.
While upward movements stood out in agricultural commodities, corn and wheat were negatively differentiated.
While rice traded on the Chicago Mercantile Exchange rose 3.1 percent, soybeans 2.6 percent, wheat decreased 2.7 percent and corn decreased 1 percent.
In the Intercontinental Exchange (ICE), cotton rose 4.4 percent, sugar rose 2.2 percent, coffee 2.1 percent and cocoa 0.5 percent.
Analysts stated that optimism increased as the Purchasing Managers Index (PMI) data in the USA fell below expectations and that this situation had a positive impact on agricultural commodities.
Stating that weekly wheat exports in the USA decreased compared to the previous week and realized as 229,4 thousand tons, analysts said that high ongoing stocks and decreasing exports caused depreciation in wheat prices last week.
On the other hand, the news that India, known as the world’s largest rice exporter, might impose new restrictions on rice exports, was the main factor supporting prices up.
While cotton exports in the USA increased to 202.3 thousand bales by increasing compared to the previous week, the main factor that increased prices was the production estimates of the US Department of Agriculture (USDA), world cotton production estimates increased by 1.03 million compared to the previous month to 116.72 million bales.
