Commodity prices up on geopolitical risks last week

ISTANBUL

Commodity prices increased across the board last week on continuing geopolitical risks, while estimates were made difficult due to the rise in the US Dollar Index, fueling concerns that the Fed may take longer than expected in combating inflation.

Some Fed officials warned that the inflation’s recovery period may stop, as the rate cut estimates for next month fell from 82% likelihood to 52% in the money markets.

Meanwhile, Russia’s threats of nuclear retaliation on Ukraine due to its use of US-supplied long-range missiles, the Army Tactical Missile System (ATACMS), gave rise to the demand in safe-haven commodities, such as gold, among others.

Gold rose 6% per ounce last week, the highest weekly increase since March 2023, despite the rising alternative cost of gold.

Analysts from Swiss investment bank UBS said that central banks will adopt a more moderate monetary policy against inflationary pressures and the slowdown in economic growth, expecting gold prices to continue rising in 2025.

Meanwhile, the US Dollar Index reached a two-year high.

Silver climbed 3.6% last week after the UN pledged to finance $300 billion annually to combat climate change at the COP29 climate action event held in Baku, as it is estimated to significantly influence the silver market.

Palladium increased 6.1% after geology explorers Earth AI and Legacy Minerals announced to have discovered one of Australia’s largest palladium mineral systems.

At the same time, platinum rose 2.3%.

As for base metals, aluminum climbed 0.9% per pound last week as China’s Finance Ministry eliminated the 13% tax rebate on aluminum exports, effective from Dec. 1. Analysts stated that this would mean the potential loss of over 5 million tons of Chinese aluminum annually in the international markets.

Copper increased 0.6% after China’s decision as it also includes copper exports.

Nickel rose 0.8% after Indonesia increased its nickel ore supply to protect small local miners.

At the same time, lead climbed 0.5% and zinc 0.6% last week.

As for the energy group, while Russia’s aggression against Ukraine intensifies with the threats of nuclear missiles, and a hypersonic missile testing, analysts say that the possible destruction of oil, gas, and refineries could cause long-term damage and even further escalate the war. The US imposed new sanctions on Russia to block Russian gas exports.

Meanwhile, India’s oil imports increased as domestic consumption rose.

Given these developments, Brent crude oil soared 5.20% per barrel last week, while the natural gas traded on the New York Mercantile Exchange hiked 14.40%.

At the same time, the agricultural group saw increases across the board except for corn and sugar.

Wheat rose 1.9% per bushel last week as US and Black Sea farmers have been storing wheat harvested earlier in the year due to the general downward trend in prices, which led to an increase.

Global wheat stocks are estimated to fall to their nine-year low by the middle of next year, according to the US Department of Agriculture.

Soybeans increased 1.4%, rice 3.7%, and corn followed a horizontal course on the Chicago Mercantile Exchange last week.

Meanwhile, coffee reached an all-time high, rising 5.9%, while cotton increased 2.2% per pound.

The ton price of cocoa soared 5.4% and sugar went down 1% per pound over the same period.

*Writing by Emir Yildirim