Commodity markets saw sharp fluctuations last week

By Burhan Sansarlioglu

ISTANBUL (AA) - Commodity markets saw sharp fluctuations last week due to cautious statements by Fed officials, mixed signals from US data, geopolitical risks, weather conditions, and production concerns.

Fed officials’ “hawkish” statements caused the US dollar to strengthen, suppressing demand in the market.

Fed Governor Michelle Bowman stated that the latest data showed inflation falling sustainably, though it is still not enough to cut rates.

If inflation stalls or reverses, Bowman said she’s open to raising interest rates, though she does not expect to see policy rate cuts in the US this year.

Fed Governor Lisa Cook said that reducing the policy restraint to maintain a healthy balance would be appropriate at some point, with inflation making significant progress and the labor market gradually cooling.

Cook added that the increase in inflation expectation will imply that the monetary policy will stay restrictive for a long period, noting that she estimates the annual inflation to remain flat for the rest of the year, and monthly inflation to see a course similar to the positive data in the second half of last year.

Meanwhile, the number of ongoing jobless claims in the US soared by 18,000 to 1.8 million in the second week of June, reaching the highest level since November 2021, raising hopes for loosened monetary policy, while positively influencing gold prices.

Precious metal prices saw increases as new home sales in the US fell to a six-month low, leading to demand concerns in silver.

Analysts noted that if the US dollar index rises above the level of 106, selling pressure may increase in precious metals.

The ounce price of gold soared due to ongoing gold purchases by central banks, while the weakening of the Chinese yuan increased the demand in Asia.

The recent market pullbacks could create buying opportunities for investors, analysts say.

In light of these developments, the ounce price of gold climbed 0.3% and palladium 2.5%, while silver fell 1.4% and platinum remained flat.

- Base metals up except for copper

Uncertainties regarding the Chinese economy affected copper prices, as producers based in China warned that customers became more cautious due to the downturn in real estate.

Meanwhile, increasing copper stocks on the London Metal Exchange and Shanghai Metals Market contributed to the pressure on prices.

The Brazilian mining giant Vale SA announced that it is planning to invest $3.3 billion over four years to develop mining operations in Brazil and Canada to increase its copper and nickel production capacity.

Lead and zinc prices increased due to the shutdown of some mines globally and reduced production, such as in China, where smelters are cutting production due to maintenance and shortages.

Given these changes, the pound price of aluminum and nickel rose 0.4%, lead 1.5%, and zinc 3.3%, while copper fell 1.1%.

As for the energy group, oil prices rose due to expectations of rising demand in the US and concerns over the ongoing tension in the Middle East leading to disruptions in the global supply.

US crude oil stocks were estimated to fall by 2.6 million barrels in the previous week.

The news that 10 people, including the sister of Ismail Haniyeh, the head of the Hamas Political Bureau, were killed in the Israeli attack on the al-Shati refugee camp in the Gaza Strip, as well as tensions on the borders of Lebanon and Israel, triggered a rise in Brent crude oil prices.

Considering these developments, the barrel price of Brent crude oil hit its highest level since April 30 at $86.11, up 0.6%, while the price of natural gas traded in British thermal units on the New York Mercantile Exchange fell 3.8%.

- Agricultural group sees mixed course

The bushel price of wheat saw its two-month low at $5.57 amid estimations for a larger harvest in the US and improved weather conditions in Russia.

Corn and rice prices saw sharp declines due to higher production forecasts.

In view of this news, the bushel price of wheat traded on the Chicago Mercantile Exchange fell 0.1%, corn 7.2%, soybean 1.3%, and rice 6.8%.

Cotton prices rose on declining global stocks and delayed shipments in the US and Brazil.

Meanwhile, Vietnamese coffee growers were hit hard by the worst drought in almost a decade this year, fueling concerns worldwide that espresso in particular will get more expensive.

Sugar prices rose after India’s agriculture authority reported that a fungal crop disease, called “red rot,” spread in the northern state of Uttar Pradesh.

Cocoa production is expected to increase with adequate rainfall in Ghana and Cameroon mid-harvest and next season.

The agricultural group may see continued sharp fluctuations on news that China could limit fertilizer exports, analysts say.

Given these developments, the pound price of cotton traded on the Intercontinental Exchange rose 3.3%, coffee 1.2%, and sugar 6%, while the ton price of cocoa fell 15.6%.

*Writing by Emir Yildirim