Trend seeking dominates commodity market last week

By Burhan Sansarlioglu

ISTANBUL (AA) - The commodity market remained mixed last week as investors searched for trends with the world economy headed toward recession fear.

Uncertainties about the Fed's future monetary policy and the possibility of recession were hot topics, while a mixed course was observed in the commodity market last week.

According to data released in the US last week, inflation increased by 0.2% on a monthly basis and 3.2% on an annual basis in July, which was lower than expected, while the producer prices exceeded expectations with an increase of 0.3% on a monthly basis and 0.8% on an annual basis in July.

Analysts believed that the producer prices raised inflation concerns in the country's economy and that the data showed that the Fed's fight against inflation has not yet come to an end.

Unclear how the US economy will react following the Fed's interest rate hikes; these analysts reported that investors are trying to price soft landing scenarios and recessions.

Concerns about the Chinese economy also caused the selling pressure on the commodity market to continue.

In China, producer prices decreased by 0.3%, while inflation fell by 4.4% in July, both indexes dropped together for the first time since 2020, triggering deflation concerns.

On the other hand, a July data from the General Administration of Customs of China, compared to the same period last year, exports decreased by 14.5% to $281.7 billion and imports decreased by 12.4% to $201.1 billion.

China's exports thus declined for three consecutive months.

- Precious metals

Precious metals declined last week, but palladium rose.

Gold lost 1.5%, silver 4%, platinum 1.1%, and palladium gained 2.3%.

Gold lost value as demand for the dollar increased following concerns about the US banking sector.

Palladium gained value as geopolitical risks stemming from the ongoing Russia-Ukraine war.

On the other hand, rises were seen in the energy group; Brent oil gained 0.4% and natural gas 7.5%.

Brent oil prices rose due to production concerns; the Organization of the Petroleum Exporting Countries (OPEC) oil production decreased by 836,000 barrels per day to 27.3 million in July compared to the previous month.

The US Energy Information Administration (EIA) also pointed out that Saudi Arabia's production cuts put upward pressure on oil prices and raised its oil price forecast for this year and next year.

In this framework, the price of Brent crude oil is expected to rise to $82.62 per barrel by the end of the year, while the previous forecast was $79.54.

Concerns that production in some liquefied natural gas (LNG) plants in Australia, the world's largest exporter of LNG, would be disrupted after employees in some plants took action to strike caused anxiety in gas markets with supply shortages.

This situation caused an increase in natural gas prices.

- Copper hits lowest level since June 30

Recession concerns significantly affected base metals last week.

The pound of copper, which hit its lowest level since June 30 at $3.68, ended the week down 3.3%.

Aluminum decreased by 0.8%, lead 0.7%, nickel 4.2%, zinc 3%.

In agricultural commodities, sharp fluctuations were prominent last week as wheat increased by 3.2%, rice by 0.3%, and corn and soybeans fell by 2%.

Cotton rose by 4.2%, sugar by 2.9%, coffee by 2.6%, and cocoa by 4%.

Wheat prices increased as Russia and Ukraine armed conflict intensified.

Limited wheat supply and strong demand from India also pushed wheat prices upwards.

Rice prices also rose after dry weather threatened production in Thailand and India's decision to ban rice exports.

Analysts noted that, despite concerns over the Chinese economy, continued purchases from China resulted in a rise in cotton prices.

Sugar prices rose as well due to supply concerns; the International Sugar Organization predicted that the global sugar market will have a deficit of 2.12 million tons in 2023/24 due to low production in major producers.

In Brazil, coffee exports rose 22% to 2.7 million bags in July, easing concerns over production and lowering coffee prices.

Cocoa prices fluctuated sharply due to weather conditions in West Africa.

*Writing by Gokhan Ergocun