Oil prices down despite of Saudi Arabia and Russia’s ongoing production cut
Commodity markets fell sharply last week amid concerns that the Fed will continue to keep interest rates high.
Data releases in the US indicated that the labor market remains strong, raising concerns that the Fed will maintain its tight monetary policy for a long period of time, resulting in continued selling pressure in the commodity market.
Nonfarm payrolls increased by 336,000 in September in the US,exceeding expectations.
Fed members’ hawkish statements also came to the fore last week.
Michelle Bowman, known as one of the Fed’s hawkish board members, called for multiple rate hikes and stated that it would be appropriate to keep rates at a restrictive level for a while.
Fed’s Vice Chairman Michael Barr agreed with Powell’s assessment that interest rates should proceed with caution.
Cleveland Fed President Loretta Mester said, “Inflation continues to be too high, and I expect it will likely be appropriate to raise rates further and hold them at a restrictive level for some time.”
Rising bond yields put pressure on precious metals
The 10-year US Treasury bond yield, which tested the highest level of the last 16 years at 4.88 last week, ended the week at 4.7900, up 21 basis points.
Analysts stated that the rise in bond yields, combined with the expectation that global interest rates will remain higher for a long time, put pressure on precious metals.
With these developments, gold prices ended the week with a depreciation of 0.9%, silver 2.7%, palladium 7.2%, and platinum 3%.
Base metals also fell sharply due to concerns over ongoing economic activity, especially in Asia.
Copper prices fell by 3%, lead by 0.7%, aluminum by 4.8%, nickel by 1.4%, and zinc by 4.2%.
Losses in Brent oil exceeded 8%
On the energy side, a mixed course was observed last week.
Brent oil prices fell 8.7%, while natural gas prices on the New York Mercantile Exchange rose 13.7%.
Although Saudi Arabia and Russia reiterated that they will continue their voluntary oil production cuts until the end of the year, signs of global economic slowdown and the first increase in US oil stocks in the last two months caused a sharp decline in oil prices.
Natural gas prices, on the other hand, rose on expectations that temperatures in the US will drop and demand for natural gas will increase.
Looking at agricultural commodities, wheat prices traded on the Chicago Mercantile Exchange gained 4.9%, corn 3.2%, and rice 0.8%, while soybean prices decreased by 0.7%.
Prices of cotton traded on the US commodity exchange Intercontinental Exchange decreased by 0.7%, coffee by 0.1%, sugar by 1.2%, while cocoa increased by 1%.
China-related concerns and hawkish statements by Fed members had a negative impact on cotton, coffee, and sugar prices.
The decline in world wheat production forecasts compared to the previous month led to an increase in prices.
The US Department of Agriculture’s (USDA) wheat production forecast for the 2023/24 season was realized at 787.34 million tons, down 6.03 million from the previous month.