Sharp fluctuations dominate commodity markets in Jan-Aug

ISTANBUL

Commodity markets were dominated by sharp fluctuations in the first eight months of the year, this January to August, while gold and silver prices rose among the most profitable commodities in the market.

Uncertainties over the November US presidential and congressional elections, the Chinese economy, and reduced supply due to unfavorable weather conditions negatively impacted the commodity market.

Meanwhile, commodity prices rose on positive estimates for the Fed to cut interest rates, US sanctions on China, China’s own efforts to strengthen its economy, and estimates for possible retaliations from China against US sanctions.

Gold prices rose as investors turned to safe haven commodities due to the ongoing tensions in the Middle East, while gold purchases by central banks continued, reaching a record high of 483 tons in the first half of the year, and doubling to 37 tons in July month-on-month.

Fed’s possible rate cuts in September and the increased demand in Asia, especially by China, to protect against uncertainties led to increasing gold prices.

As for silver prices, they increased on US macroeconomic data signaling a strong economy, a slowdown in production in mines worldwide, and supply lagging behind demand.

The gold to silver ratio, which saw the level of 92 throughout the year, fell to 88 as concerns over economic activity eased.

Given these changes, the ounce prices of gold and silver rose 21.3%, while gold in particular broke a record, reaching $2,531 per ounce in Jan-Aug.

At the same time, the ounce price of silver tested its highest since December 2012 at $32.5.

Ole Hansen, head of commodity at Denmark-based Saxo Bank, told Anadolu that geopolitical risks arising from the Russia-Ukraine War, the conflict in the Middle East, and the upcoming elections in the US influence gold and silver prices.

Hansen stated that the Chinese demand for gold and silver was due to the troubles in the country’s real estate sector prompting investors to invest in more protected assets, while gold provides stability amid geopolitical uncertainties and reduced dollarization.

He added that the prices see a positive impact derived from the start of the rate cut cycle in the US, while gold has historically performed well.

*Writing by Emir Yildirim