Weekly Review of Commodity Markets: Fed Expectations and Shipment Risks
While the Fed's hawkish policies weighed on metals and oil in global commodity markets, Black Sea shipment risks pushed agricultural products to their peak.
Last week, forecasts regarding the US Federal Reserve's hawkish steps and geopolitical developments determined the direction of the commodity markets. While precious metals and oil prices recorded declines, shipment risks originating from the Black Sea and production concerns caused increases in agricultural commodities.
Geopolitical Developments and the Middle East
Developments in the Middle East continued to impact commodity prices throughout the week.
Expectations that the Strait of Hormuz could reopen pushed oil prices down.
The US government's decisions on new economic sanctions against Iran and expectations that diplomatic contacts in the region might resume were at the focus of investors.
US Inflation Data and the Fed
The personal consumption expenditures price index announced in the US increased by 0.2 percent monthly in July, exceeding expectations, while rising to 3.7 percent on an annual basis.
The persistence of inflation above the Fed's 2 percent target strengthened hawkish expectations in monetary policy and projections for interest rate hikes.
Jackson Hole and the Bond Market
Speaking at the Jackson Hole Economic Policy Symposium, Fed Chair Kevin Warsh exhibited a hawkish stance by giving messages prioritizing inflation.
Following the statements, the probability of a 25 basis point interest rate hike at the September meeting increased, while the 2-year Treasury yield rose to 4.35 percent and the dollar index strengthened.
Negative Trend in Precious Metals
In the precious metals group, a generally negative pricing was observed except for palladium, and gold's three-week winning streak came to an end.
On an ounce basis, prices increased by 5.3 percent in palladium, while declining by 3.8 percent in silver, 3.2 percent in gold, and 3.0 percent in platinum.
Base Metals and Agricultural Products
In base metals, uncertainties regarding potential US copper tariffs and inventory changes were influential, with zinc and aluminum registering limited increases.
As a result of shipment problems in the Black Sea and production concerns, wheat contracts on the Chicago Board of Trade saw their highest level since July 2023.