Commodity prices down on rising dollar demand

Dollar demand, rising due to US Fed minutes signaling continued hawkish policies, last week caused commodity prices to drop

Commodity markets took a dive last week as demand for the dollar rose.

Commodity prices, which started to gain value against the dollar with lower-than-expected inflation data in the US, closed the week with losses due to Federal Reserve minutes showing that interest rate hikes will continue until inflation drops significantly.

In September a 55% probability is seen that the Fed will hike interest rates by 50 basis points and a 45% probability they will be raised 75 basis points.

Housing starts in the US fell 9.6% in July to 1.44 million, the lowest level since February 2021.

Construction permits dropped 1.3% on a monthly basis in July to 1.67 million.

The sharp decline in housing construction due to high mortgage rates and material price hikes raised concerns that the housing market may contract further in the third quarter of the year.

After the recent macroeconomic data, the possibility of a recession in the US strengthened.

The dollar gained 1.1% against the Chinese yuan on a weekly basis to 6.8171, the highest level since September 2020, after the People’s Bank of China lowered the one-year borrowing rate from 2.85% to 2.75% last week, despite the risk of recession.

With these developments, last week gold depreciated 3.1%, platinum 6.9%, silver 8.5%, and palladium 4.5%.

Copper prices fell 0.2% along with lead 4.2%, zinc 1.4%, aluminum 2.1%, and nickel 3.6%.

On the energy side, which followed a mixed course last week, Brent oil fell 1.9%, while natural gas traded on the New York Mercantile Exchange gained 5.8%.

Expectations of falling in oil demand due to concerns about the global economic slowdown, the production increase planned by OPEC and the OPEC+ group, record US crude oil exports, the resumption of oil production in Libya, as well as limited oil exports from Russia and Iran suppressed oil prices.

Due to “technical” problems after the Ukraine war began on Feb. 24 experienced in main pipelines carrying Russian gas to Europe,gas deliveries from Russia dropped significantly, and supply concerns were reflected in gas prices.

As ships carrying grain started to set off from Ukraine under a deal reached last month in Istanbul, dwindling supply concerns had a particularly negative impact on prices of agricultural commodities.

Wheat traded on the Chicago Mercantile Exchange fell 6.1% along with corn 3%, soybeans 3.3%, and rice 0.4%.

Coffee lost 4%, sugar 3.1%, and cocoa 0.9%.

On the other hand, amid growing drought and high temperature concerns in Europe and worldwide, cotton prices tested a level of $1.2 and closed out the week at $1.16, up 6.7%, after seeing the highest level in the last two months.


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