The commodity market has left behind a week dominated by declines.
The Fed’s continued hawkish stance and the increase in demand for the dollar negatively affected asset prices. Following the Fed’s monetary policy decisions, selling pressure dominated the commodity market as the bank signaled that it might increase interest rates for the rest of the year.
The Fed did not change the policy rate as expected, leaving it in the range of 5.25-5.50 percent, the highest level in 22 years.
Making statements after the decision, Fed President Jerome Powell stated that they were ready to increase interest rates further if appropriate, and that they intended to keep monetary policies at a restrictive level until they are sure that inflation is sustainably decreasing towards the target.
Stating that the decision they made to keep the policy rate constant at this meeting did not mean that they reached the desired stance in monetary policy, Powell stated that most of the Federal Open Market Committee (FOMC) members predicted that it would be appropriate to increase interest rates once again in the remaining 2 meetings this year.
Powell emphasized that a “soft landing” in the economy is their primary goal and noted that they have been trying to achieve this all this time. In the “dot plot” chart published after the meeting, which includes the Fed’s economic projections and members’ expectations regarding the policy rate, the forecast for the federal funds rate remained at 5.6 percent for the end of this year, signaling another interest rate increase.
With these developments, the dollar index completed the week at 105.6 with an increase of 0.2 percent.
Uncertainties in global economies in the dilemma of inflation and recession continued to affect the commodity market.
The increase in stocks, especially in metals, had a downward impact on commodity prices.
As the dollar gained value and the stock markets lost value due to expectations that the Fed would keep interest rates at high levels, investors turned to safe havens such as gold and silver, while the ounce prices of gold and silver increased by 0.1 percent and 2.3 percent, respectively.
While palladium lost 0.1 percent in value last week, platinum also gained 0.1 percent in value.
In the over-the-counter market, copper lost 2.8 percent, lead 2 percent, and nickel 3.4 percent, while zinc followed a horizontal course. Additionally, aluminum gained 1.7 percent in value.
Copper stocks listed on the London Metal Exchange (LME) have more than doubled in two months, reaching their highest level since May 2022.
While registered main copper stocks were only 54 thousand 225 metric tons on July 12, they reached 149 thousand 600 metric tons as of last week.
While total guaranteed lead stocks in LME increased to 69 thousand 200 tons, zinc stocks exceeded 81 thousand tons.
Energy commodity also remained under hawkish pressure from the Fed
While Brent oil lost 1.4 percent in value last week, natural gas traded on the New York Mercantile Exchange increased by 0.2 percent.
Saudi Arabian Minister of Energy Prince Abdulaziz bin Salman defended the cut decision of OPEC + countries and said that light regulations were needed to limit volatility in international energy markets.
Minister Abdulaziz bin Salman also noted that concerns about demand in China, the world’s largest oil importer, and uncertainties regarding the road map of global central banks in the fight against inflation should be closely monitored.
Analysts said that concerns that the Fed will continue its hawkish stance on Brent oil outweigh supply concerns.
Analysts stated that there is a risk of Brent oil rising to 100 dollars, but the ongoing high inflation environment globally may mean tighter monetary policies, and said that this situation may limit the rise in Brent oil prices.
Natural gas prices rose sharply after the US Energy Information Administration (EIA) predicted in its monthly Drilling Efficiency Report that US gas production from US shale basins would be lower in October than in September.
While wheat traded on the Chicago Mercantile Exchange lost 4.1 percent, soybeans 3.4 percent and rice 2.4 percent, corn gained 0.3 percent.
Wheat prices decreased with the entry of cheap Russian grain into the market.
Brazil-based oilseed group Abiove predicted that the country’s soybean exports will exceed 99 million tons this year. Yield potential for soybeans rose slightly this week after falling for several weeks due to historic drought in the U.S. Corn Belt.
With these developments, decreases were observed in soybeans.
The decline in coffee exceeded 5 percent
Coffee traded on the Intercontinental Exchange lost 5.6 percent, cocoa 4.6 percent and cotton 0.6 percent.
Rain forecasts in Brazil eased drought concerns and caused coffee prices to fall sharply. Rural Clima Meteorologia company, which provides agrometeorological forecasting services based in Brazil, said that rains may increase in the country.
Profit sales were seen in cocoa due to excessive purchases.
While sugar continues to receive support from hot, dry weather forecasts in Brazil, the strong real is deterring export sales from Brazil’s sugar producers.
Sugar, which increased by 0.6 percent last week, reached its highest level since October 2011 with $ 0.2788.