Commodity markets witnessed downward pressure last week
Commodity markets were dominated by downward pressure last week,
as demand for the US dollar hiked amid concerns that the Fed may
cut rates later than other central banks, Azernews
reports, citing Anadolu Agency.
Interest rate decisions of central banks influenced commodity
markets.
The Fed left its policy rate unchanged within expectations,
leaving it at a 23-year high of 5.25% to 5.50%, while expectations
for three rate cuts this year remained high.
Meanwhile, the Swiss National Bank (SNB) cut its policy rate to
1.50%, which came as a surprise for investors and caused the US
dollar index to rise after the Fed decided to keep interest rates
unchanged.
The rise of the US dollar against other currencies put downward
pressure on commodity prices, analysts say.
Gold price hits historic high
The Bank of Japan’s (BoJ) first interest rate hike in 17 years
negatively impacted precious metal prices, as the bank raised its
short-term interest rates from minus 0.1% to a range of 0% to 0.1%
last week.
Silver prices fell as US data continued to signal that the
country’s economic activity remains strong, with the US
Philadelphia Fed Manufacturing Index revealing that the sector
continues to expand, as the index gained a positive value for the
second consecutive month, although it fell to 3.2 in March.
The current US account deficit decreased by 15.7% last year to
$818.8 billion.
The US Purchasing Managers’ Index (PMI) for the manufacturing
industry rose 0.3 points month-on-month to 52.5 in March, hitting a
21-month, exceeding market expectations, and indicating that the
manufacturing sector is expanding. As for the Services PMI in the
US, the index fell 0.6 points month-on-month in March to 51.7.
Existing home sales in the US exceeded expectations in February,
increasing by 9.5%, the highest increase this year.
Platinum and palladium prices fell due to the increasing demand
for electric vehicles, as the demand for catalytic converters used
in conventional vehicles decreased.
The ounce price of gold reached a new peak of $2,222.8 as the
Fed maintained its forecast of three rate cuts by the end of the
year.
In light of these developments, the ounce price of gold rose
0.4% last week, while silver fell 1.9%, platinum 4.4%, and
palladium 8.5%.
Copper price fell from its 13-month high
Base metals were under selling pressure last week, as the copper
price per pound, which reached its highest level since Feb. 2023 at
$4.14, fell from its 13-month high and finished the week down
3%.
The price of aluminium per pound hiked by 1.6, while nickel,
zinc, and lead all fell by 3.1%, 3%, and 4.8%, respectively.
The energy sector experienced price increases last week.
Last week, Brent crude oil prices rose due to geopolitical
tensions and supply concerns as Ukraine’s attack on Russia’s oil
refineries raised fears that fuel supplies to Asia and Europe would
be disrupted.
Meanwhile, rising tensions in the Middle East continue to put
upward pressure on prices, with concerns that the region’s ongoing
conflicts will disrupt the oil supply.
Yemeni Prime Minister Ahmad Awad bin Mubarak announced the
suspension of the UN roadmap, which was announced by Hans
Grundberg, the UN special envoy for Yemen, to establish a
cease-fire with the Iranian-backed Yemeni group Houthis, due to
escalating tensions in the Red Sea.
The Houthis continue to target Israeli-linked vessels passing
through the Red Sea.
The group announced that they had carried out an attack using a
US-made unmanned aerial vehicle (UAV), and a few days later, US and
UK forces conducted 10 attacks on the western city of Al Hudaydah
in Yemen.
The projected decline in commercial crude oil stocks in the US
strengthened the perception that demand remained strong, giving
rise to Brent crude oil prices.
Contrary to expectations, the American Petroleum Institute
announced that the US commercial crude oil stocks fell by 1.5
million barrels compared to the previous week. The market expected
stocks to rise by 77,000 barrels.
US commercial crude oil inventories exceeded expectations and
fell by about 2 million barrels last week. Markets expected stocks
to decrease by 900,000 barrels.
Natural gas demand in the US increased as temperatures are
expected to fall.
Given these changes, the barrel price of Brent crude oil hiked
0.2%, while natural gas traded on the New York Mercantile Exchange
in British thermal units (MMBtu) rose 2.2%.
Agricultural group see mixed course, while cocoa reaches new
high
Wheat and corn prices soared on news that the EU will tax grain
imports from Russia and Belarus.
Meanwhile, news that Thailand planned to ban corn imports from
neighboring countries that pollute the air by burning agricultural
land, as well as the Buenos Aires Grain Exchange’s downgrade of
Argentina’s corn production forecast from 56.5 million tons to 54
million tons for the 2023/24 season, pushed corn prices higher.
Considering this news, the price of wheat traded on the Chicago
Mercantile Exchange rose 5.3%, corn 0.6%, whereas soybeans
decreased 0.5%, and rice fell 2.7%.
Reduced rainfall in Brazil has raised concerns about coffee
production.
Sugar prices fell due to increased production in Brazil, while
the Brazilian real depreciation against the US dollar had a
negative impact on sugar prices.
Concerns about cocoa supply in West Africa persist, as adverse
weather conditions in the region and import restrictions imposed by
European importers impacted cocoa prices.
Last year, harsh growing conditions and crop diseases in West
Africa hampered cocoa production, driving prices higher.
The global deficit is expected to continue as current cocoa
production is insufficient to meet demand.
Following the 2016 El Nino weather phenomenon, which caused
drought and a sharp rise in cocoa prices, rates are again on the
rise as a result of the current El Nino.
The price of cocoa peaked at $8,960 per ton, up 10.7% last
week.
In light of these developments, the price of cotton on the
Intercontinental Exchange fell 1.8%, sugar 0.7%, and coffee
1.2%.
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