Interest Rate Expectations and Energy Supply Developments in Global Commodity Markets
While expectations that the Fed may keep interest rates steady supported precious metals in commodity markets, the situation in the Middle East and hurricanes pushed energy prices higher.
In the past week in commodity markets, expectations that the US Federal Reserve could keep interest rates steady supported gold and silver, while developments in the Middle East and production disruptions caused by hurricanes impacted energy prices.
Fed Expectations and Bond Yields
Signs of a cooling labor market in the US caused expectations regarding a Fed rate hike to be pushed back to December. In money markets, the probability of the bank keeping the policy rate steady at its October meeting came to the fore.
The US 10-year Treasury yield closed the week at 5.25 percent, while the dollar index rose 0.3 percent to 102.2 levels, leading to a recovery in precious metals.
Price Movements in Gold and Silver
Precious metals followed a volatile course throughout the week depending on interest rate expectations. It was announced that the central bank of China increased its gold purchases in September, carrying this streak to its 23rd month.
With buying from lower levels in the final trading days of the week, gold ended its two-week losing streak, while silver also recovered and closed the week higher.
Base Metals and China Demand
In base metals, the return of Chinese buyers to the market after the holiday and the ongoing strike at the Centinela mine in Chile increased supply risks.
While the Yangshan premium, which indicates China's demand for imported copper, hit its highest level since November 2022, aluminum on the London Metal Exchange fell to a three-month low.
Energy Supply and the Oil Market
Conflicts in the Middle East, the slowdown of tanker traffic in the Strait of Hormuz, and Hurricane Isaias affecting production in the Gulf of Mexico heightened concerns over energy supply.
According to US Energy Information Administration data, approximately 1.3 million barrels per day of oil production were taken offline due to the hurricane, while the barrel price of Brent crude finished the week up 2.12 percent.
Agricultural Commodities and USDA Report
The report published by the US Department of Agriculture and expectations regarding the hurricane's impact on the harvest led to divergence in agricultural commodities.
While the ministry's upward revision of corn and wheat production forecasts increased selling pressure, downward revisions to rice production and stock forecasts provided support to prices.