Strengthening expectations that the US Federal Reserve (Fed) may continue its “hawkish” steps and continuing concerns about the Chinese economy negatively affected the commodity market.
While predictions that the Fed will not increase interest rates for the rest of the year have been dominant for a while, predictions that the bank may continue its tightening monetary policy have become stronger after the data announced for the service sector came in better than expectations.
In China, the Caixin service sector PMI falling below expectations at 51.8 and the composite PMI falling to 51.7 compared to the previous month also reduced the risk appetite in the commodity market.
Analysts stressed that the data released in China indicate that the recovery in the country’s economy continues to be fragile.
In August, exports decreased by 8.8 percent to 284.9 billion dollars compared to the same period last year, and imports decreased by 7.3 percent to 216.5 billion dollars.
The decrease in foreign trade data announced in China also caused concerns about demand in the commodity market.
Palladium hit the lowest level since December 2018
There were sharp declines in precious metals last week. During the week, gold decreased by 1.1 percent, silver by 5.2 percent, and platinum by 7 percent. Palladium, which reached its lowest level since December 2018 at $1,185.24, also completed the week with a 1.7 percent decrease.
As bond interest rates rose and the dollar continued to gain value against other currencies, the ounce price of gold lost value.
Analysts stated that expectations that the Fed may continue its hawkish steps have become stronger, and noted that the ounce price of gold is in a downward trend.
Last week, a downward trend was also prevalent in base metals. In the over-the-counter market, copper lost 3.5 percent, lead 1.4 percent, aluminum 2.4 percent, and nickel and zinc 3.1 percent.
Brent oil continued its upward trend for the 2nd week
Despite the downward trend in the commodity market last week, the rise in Brent oil continued. Brent crude rose 1.6 percent last week.
Brent oil continued its upward trend due to the announcements of the world’s two largest oil exporters, Saudi Arabia and Russia, that they would extend their supply cuts until the end of the year.
Concerns about a decrease in global supply supported prices upwards.
On the other hand, the American Petroleum Institute announced that oil stocks in the country decreased by 5.5 million barrels. Market expectation was that stocks would decrease by 1.4 million barrels. Increasing demand in the USA, the world’s largest oil consumer, restricts the decline in prices.
Natural gas, traded on the New York Mercantile Exchange, finished the week with a decrease of 5.8 percent.
Although the employees of the US energy company Chevron in Australia went on strike, natural gas prices fell due to high stocks resulting from weak heating demand during the mild winter period.
Sugar reached its highest level since October 2011 and cocoa since March 2011
A mixed course was observed in agricultural commodities last week.
While wheat traded on the Chicago Mercantile Exchange completed the week flat, rice lost 3.3 percent and soybeans lost 0.4 percent. Egypt, on the other hand, gained 0.3 percent.
Increasing expectations for demand, with oil prices remaining high, led to a rise in corn. The increase in world rice production estimations caused a depreciation in rice.
In the Intercontinental Exchange (ICE), cotton decreased by 4.4 percent, coffee decreased by 2.5 percent, while sugar increased by 2.3 percent and cocoa increased by 1.4 percent. Sugar reached its highest level since October 2011 at $0.2710, and cocoa reached its highest level since March 2011 at $3,697.
Increasing concerns about a production deficit in the sugar market caused an increase in prices.
The International Sugar Organization (ISO) estimates that there will be a production deficit of 2.12 million tons in the 2023/24 season. India’s sugar production prospects are declining. There are concerns that production will decrease with the El Nino effect.
Alvean, one of the world’s leading sugar trading companies, expects a deficit in sugar as the poor outlook for Indian crops will pull down global sweetener stocks.
Cocoa prices rose due to the devaluation of Nigeria’s currency, the Naira, and the cocoa bean shortage in the country.
Increasing concerns about excess production in the coffee market caused a depreciation in coffee prices. The US Department of Agriculture estimates that there will be a surplus of 8 million bags of coffee in the 2022/23 season.