Commodity markets see mixed course as recession concerns ease

By Burhan Sansarlioglu

ISTANBUL (AA) – Commodity markets saw a mixed course last week as precious and base metals rose while recession concerns in the US eased and other commodity groups declined over concerns regarding the Chinese economy.

The US Consumer Price Index (CPI) climbed 0.2% month-on-month in July, in line with expectations, and increased 2.9% on an annual basis, below expectations.

Annual inflation slowed down for the fourth consecutive month in the meantime, reaching its lowest since March 2021, on track to the Fed’s 2% target, allowing the bank to focus more on the goal of maximizing employment.

Meanwhile, US retail sales climbed 1% month-on-month in July, exceeding expectations.

Given this news, the Fed is more likely to cut interest rates by 50 basis points in September according to estimates in the money markets, while the bank’s possible decision to cut rates by a total of 100 points until the end of the year remains strong.

The US Producer Price Index (PPI) increased 0.1% month-on-month and 2.2% on an annual basis in July, below expectations.

As for China, the nation’s industrial production remained below estimates with an annual increase of 5.1%, while the unemployment rate stayed above expectations at 5.2%.

At the same time, Chinese retail sales exceeded expectations, climbing 2.7%, showing signs that the country’s economy is reviving after previous recession concerns.

- Ounce price of gold hits record high

The ounce price of gold hit a record high of $2,509, as the Fed edges closer to a rate cut, other central banks make increased gold purchases, and the conflicts in the Middle East and in Ukraine continue.

Makoto Sakurai, former board member of the Bank of Japan, stated that the bank will not raise interest rates again positively influenced precious metal prices.

Given these developments, the ounce price of gold climbed 3.2%, silver 5.7%, platinum 3.3%, and palladium 4.8% last week.

- Pound price of copper rises above 4%

Concerns in base metals eased since the US labor market remained strong, while copper supply concerns strengthened as miners at the Escondida copper mine run by the BHP Group in Chile went on a strike due to a failure to reach a wage agreement.

Copper prices rose on the news that China closed the Shandong plant, one of the largest copper producers, while supply concerns were further increased due to possible disruptions in Africa’s exports due to issues between Zambia and Congo.

Analysts say that the US, Canada, Australia, and European countries are putting in the effort to overcome China’s dominance over copper through subsidies and investments, giving increase to production costs in copper.

In light of these developments, the pound price of copper rose 4.1%, nickel 1.9%, lead 0.3%, zinc 1.2%, and aluminum 2.9% last week.

As for the energy group, the barrel price of Brent crude oil fell 0.4%, while the price of natural gas traded on the New York Mercantile Exchange in British thermal units (MMBtu) fell 0.7% in the same period.

- Agricultural group sees negative trend except for wheat, coffee

Soybean and corn prices fell on higher production estimates in the US and Brazil, while corn prices declined on reduced demand in China.

Analysts noted that oversupply may lead to selling pressure on corn and rice supplies.

The bushel price of soybeans hit its lowest since September 2020 at $9.5.

On the Chicago Mercantile Exchange, the bushel price of wheat rose 1.6%, while corn fell 0.7%, soybeans 4.7%, and rice 1.8% last week.

Meanwhile, coffee prices rose on concerns over frosts in Brazil, and cocoa prices fell due to optimism that Western African production would rebound despite recent below-average rainfall, and increased production in Cameroon pulled cocoa prices downwards.

The pound price of cotton tested its lowest since October 2022 at $0.66.

On the Intercontinental Exchange, the pound price of coffee rose 2.4%, while cotton fell 1.6%, and sugar 2.1% last week. At the same time, the ton price of cocoa declined 3.9%.

*Writing by Emir Yildirim