Inflationary pressure and “hawkish” monetary policy fueled concerns about demand on the commodity markets. Last week, coffee was down 5.9 percent, cotton was down 5.3 percent, zinc was down 4.7 percent, aluminum was down 2.1 percent, copper was down 1.3 percent, and wheat was down 1.1 percent.
Demand concerns in commodity markets intensified last week amid inflationary concerns and “hawkish” expectations for central bank monetary policy.
After the positive trend on the commodity market in the previous week, there were declines last week.
While the easing of monetary policy uncertainty following the European Central Bank’s (ECB) historic rate hike last week was positive for commodity markets, last week in the US the surge in ‘hawkish’ monetary policy forecasts after inflation led to it exceeded expectations that the commodity market remained negative.
In the US, the consumer price index (CPI) rose against expectations by 0.1 percent on a monthly basis and by 8.3 percent on an annual basis. Annual inflation in the euro zone hit a record 9.1 percent in August on soaring energy prices.
DOLLAR WIND
Analysts said expectations that central banks will raise interest rates further at historical levels in line with inflation concerns have risen, saying the dollar will weaken against other currencies and commodities ahead of next week’s Federal Reserve (Fed) meeting was upgraded.
Markets are pricing in the Fed’s 76% chance of a 75 basis point hike, 24% chance of a 100 basis point hike in interest rates.
Concerns about demand on the commodities market increased last week due to fears of inflation and “hawkish” expectations regarding the monetary policy of the central banks.
Analysts said the Fed’s aggressive rate hikes were priced in despite the recession risk.
GOLDEN ON THE DOWN AFTER APRIL 2020
Gold an ounce, which last week hit its lowest level since April 2020 at $1,654, ended the week down 2.4 percent.
Palladium was down 2 percent, silver was up 3.8 percent and platinum was up 2.9 percent.
Analysts, Silver; He said that it is an industrial metal whose supply is expanding and that demand for silver is increasing.
Base metals were also dominated by a sell-off last week. Over-the-counter, copper was down 1.3 percent, lead was down 0.9 percent, aluminum was down 2.1 percent and zinc was down 4.7 percent.
Nickel, on the other hand, increased by 8.1 percent. Analysts said that despite continued selling pressure in the commodity market, nickel supply is still tight and platinum prices have also risen.
OIL AND GAS DECLINED
Last week, Brent oil fell 1.2 percent and natural gas traded on the New York Mercantile Exchange fell 2.9 percent.
While worries about global oil demand weighed on the fall in Brent oil prices, tightening Covid-19 measures in China and fears that rate hikes in the US and Europe would slow the economy and reduce fuel demand continue to weigh down prices .
The forecast increase in crude oil stocks in the USA, the world’s largest oil producer and consumer, also supported the price drop due to the perception of weak demand.
The American Petroleum Institute announced that the country’s crude oil reserves are expected to increase by about 6 million 35 thousand barrels. The market expectation was that inventories would fall by about 200,000 barrels.
A DECLINE IN AGRICULTURAL RAW MATERIALS
In the past week, the declines were also clear for agricultural commodities.
Wheat and corn, traded on the Chicago Mercantile Exchange, fell 1.1 percent and 0.8 percent, respectively, while rice rose 1.4 percent and soybeans rose 2.6 percent.
The increase in global wheat production estimates compared to the previous month caused wheat prices to depreciate, and the decline in US production estimates caused soybean prices to rise.
Last week, cotton fell 5.3 percent and coffee 5.9 percent, while sugar rose 0.3 percent. Cocoa stayed flat.
Expectations of interest rate hikes and concerns about economic growth caused cotton prices to fall.
While concerns about coffee demand due to slowing global growth weighed on coffee prices, drought conditions in Brazil and lower sugar production compared to last year caused sugar prices to rise.
Analysts said interest rate decisions by the Fed, Bank of England (BoE) and Bank of Japan to be announced this week could have an impact on asset prices.
GROWTH CONCERNS RISING
Futures and commodities market expert Zafer Ergezen explained that concerns about the Fed’s rate hike had increased after the data from the US, saying, “It also raises concerns about economic growth.”
Explaining that wheat ended the week on a decline, Ergezen said: “There are still concerns about wheat and corn production in Europe due to rising air temperatures. Despite the increase in the newly announced production forecasts, prices rose on Friday. Due to high production forecasts, however, the increase should be limited. Wheat has already closed the week down,” he said.
Regarding the corn decline, Ergezen said oil prices were affecting demand for corn. Stressing that corn is one of the raw materials for biodiesel production, Ergezen noted that the change in oil prices prompted producers to increase or decrease demand for corn.
Ergezen explained that the floods in the Far East, especially in Pakistan, caused the rise in rice. Ergezen explained that concerns about the rice supply are growing, saying the fall in production estimates has also contributed to the increase in rice volume.
Noting that the higher-than-expected inflation figure in the US raised expectations of rate hikes and concerns about economic growth, Ergezen explained that this situation is having a negative impact on cotton and coffee. Ergezen explained that concerns about the Chinese and European economies have had a negative impact on the coffee market. (AA)
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