The commodity market saw a slight upward trend last month, led by the agricultural group, as concerns about a recession in the US faded and expectations that the US Federal Reserve (Fed) would cut interest rates remained strong.
The main factor that positively affected the commodity market was the continued strength of expectations that the Fed would cut interest rates, as inflation and retail sales data released in the US indicated that recession concerns had diminished.
The country's Consumer Price Index (CPI) increased by 0.2 percent on a monthly basis in July, in line with expectations, and by 2.9 percent on an annual basis, below estimates. Annual inflation, which continued to slow for the fourth consecutive month, recorded its lowest level since March 2021.
Analysts said inflation in the US is showing that the Fed is on track to meet its 2% target, which will allow the bank to focus more on its other goal of maximizing employment.
Retail sales in the country increased by 1 percent monthly in July, above expectations, and the increase in retail sales during this period was the highest monthly increase recorded since January 2023.
While it is almost certain in money market pricing that the bank will cut interest rates by 100 basis points by the end of the year, it is anticipated that a 50 basis point rate cut could be made at the meetings in November or December.
The effects of the historic selling pressure seen in global markets last month due to concerns that economic activity in the US could slow down more sharply than anticipated were also seen on asset prices, causing product-based divergences in pricing in the commodity market.
As recession concerns in the country eased and expectations that the Fed would cut interest rates remained strong, a slight upward trend was seen in the commodity market last month, led by the agricultural group.
Despite a mixed trend in precious metals, a historic peak was seen in gold
In August, gold gained 2.3 percent and palladium 4.2 percent in value per ounce, while silver lost 0.5 percent and platinum 5 percent. The price of an ounce of gold reached a historical peak of $2,531.7 last month.
Strengthening expectations that the Fed is moving closer to cutting interest rates, purchases from central banks and Chinese consumers, and conflicts in the Middle East and Ukraine supported the ounce price of gold.
Analysts said that the safe haven feature of gold, especially among precious metals, stands out and geopolitical risks play a major role in maintaining the strength of gold prices.
The decline in bond yields also supported the price increases in gold.
Among base metals, the rise in aluminum reached 6 percent
On the other hand, in the over-the-counter market, prices fell by 0.3 percent for copper and 2.3 percent for lead on a per pound basis last month, while they rose by 5.9 percent for aluminum, 1.4 percent for nickel and 7.6 percent for zinc.
Canadian steel and aluminum producers have called on Prime Minister Justin Trudeau's government to quickly impose new tariffs on Chinese products, raising supply concerns for base metals and causing increases in aluminum, nickel and zinc prices.
Increasing copper stocks continued to put pressure on copper prices.
As concerns over copper demand continue, Melbourne-based mining company BHP Group has predicted that demand from China will fall this year.
Concerns about the Chinese economy and growing concerns that the Bank of Japan (BoJ) will continue its tight monetary policy were also among the factors that had a downward impact on copper prices.
BOJ Deputy Governor Ryozo Himino said in a statement that the bank will closely monitor developments in financial markets and that if the economy and prices continue to grow as expected, the tightening of monetary policy will continue.
In Japan, the Tokyo Consumer Price Index (CPI) for August also rose by 2.6 percent, while the core Tokyo CPI also rose by 2.4 percent, exceeding expectations. Industrial production in the country rose by 2.8 percent monthly and 2 percent annually, below expectations. Retail sales in Japan also fell short of expectations, rising by 0.2 percent monthly and 2.6 percent annually.
Analysts said that the Tokyo CPI data released in the country kept alive the market expectations that the BOJ will make further interest rate hikes in the coming months.
Looking at the energy group, while the barrel price of Brent oil decreased by 5.5 percent in August, the price of natural gas traded on the New York Mercantile Exchange increased by 4.5 percent in British Thermal Units (MMBtu).
Weak economic data from China, the world's largest crude oil importer, continued to put downward pressure on oil prices, supporting market players' demand concerns.
Predictions that the OPEC+ group, which consists of the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producer countries, may increase production starting in October also led to a decline in Brent oil prices.
Natural gas prices rose sharply last month after news that Ukrainian troops had seized a chokepoint that allows Russian gas to be shipped to Europe.
In the agriculture group, coffee and cocoa saw a sharp increase
On the Chicago Mercantile Exchange, prices per bushel for wheat rose 4.6 percent, for corn rose 0.3 percent, while for soybeans, they fell 2.2 percent and for rice, they fell 1.5 percent. Soybeans hit $9.50 per bushel, the lowest since September 2020.
On the Intercontinental Exchange, prices per pound rose 1.5 percent for cotton, 5 percent for sugar and 6.5 percent for coffee. The price per ton of cocoa rose 9.7 percent last month.
The price of coffee per pound tested a 13-year high of $2.5945 in August.
As concerns about the global economy eased somewhat, demand concerns in the agricultural group also fell.
The decrease in production in France and risks originating from Russia and Ukraine caused wheat prices to increase.
On the other hand, rising soybean production estimates in the US have led to a decline in prices. The latest estimates from the US Department of Agriculture (USDA) show that the soybean stock rate that can be used in the US in 2024-25 will be 12.8 percent, a five-year peak, and above the previous year's rate of 8.4 percent.
The National Supply Company (Conab), which is affiliated with the Brazilian Ministry of Agricultural Development and Family Farming, also predicted that soybean production in the country will increase in the 2023/2024 season.
Analysts noted that rice prices could also face selling pressure for several months due to excess supply. The combination of increased production in the US and reduced demand from China has been a major factor in the decline in rice and soybean prices.
Sugar prices have increased as expectations of a global production deficit continue in the sugar market.
Increasing predictions that coffee production in Brazil may decrease have led to an increase in coffee prices, while concerns about frost in the country have also accelerated the rise in coffee prices.
Cocoa production concerns continued as rainfall inadequate in West Africa, a major factor in the sharp rise in prices last month.
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