Demand for gold and silver rises

Concerns that conflicts in the Middle East could escalate further and that the US Federal Reserve (Fed) might maintain its tight monetary policy for longer than expected were the most significant factors affecting the commodity market.

While Fed Chair Jerome Powell's statements influenced asset prices, Powell noted that they are carefully monitoring recent data showing the resilience of economic growth and labor demand, and that additional evidence of growth consistently above trend or that tightness in the labor market is not easing could require further tightening of monetary policy.

Pointing out that there could still be meaningful tightening given the rapid pace of tightening so far, Powell stated that they are committed to achieving a policy stance that is restrictive enough to sustainably bring inflation down to 2% over time and to keep policy restrictive until they are confident that inflation is moving toward that target.

Addressing the rise in bond yields, Powell said, "It is my view that the high bond yields are not driven by expectations of high inflation or expected interest rate hikes." Powell also reminded that the rise in bond yields has tightened financial conditions.

While it is considered certain in pricing in money markets that the Fed will not change the policy rate next month, expectations that the policy rate could be kept steady at the December and January meetings have strengthened.

On the other hand, while selling pressure in bond markets came to the fore last week, the US 10-year bond yield exceeded the 5% level last week, testing its highest level in the last 16 years.

Analysts stated that despite the steps taken by the Fed, the desired slowdown in economic activity has not been achieved and the threat of inflation remains a source of concern, adding that this situation has increased selling pressure in bond markets.

The positive impact on the commodity market of the Chinese government providing record levels of liquidity to the economy and the good macroeconomic data released in the country did not reach the expected level.

The Chinese economy grew by 4.9% in the third quarter of the year compared to the same period in 2022, surpassing expectations of 4.5%, while industrial production in the country increased by 4.5% annually in September and retail sales increased by 5.5%, exceeding forecasts. Analysts noted that despite these data, concerns regarding the Chinese economy persist.

DEMAND FOR SAFE-HAVEN ASSETS INCREASED

The ounce price of gold, which tested its highest level since May at 1,997 dollars last week, completed the week with a 2.5% increase at 1,981 dollars. While silver increased by 2.9% and platinum by 1.6%, palladium recorded a 4.3% decrease.

Palladium prices extended their decline to the 5th week as concerns about the demand for catalytic converters used in automobiles continued.

Despite the "hawkish" forward guidance provided by Fed Chair Jerome Powell, demand for gold, which is characterized as a safe haven, remained strong due to concerns that conflicts in the Middle East could escalate further.

Analysts stated that increasing geopolitical risks in global markets have led investors to act cautiously, and that the rising risk perception supports the demand for safe-haven assets.

On the other hand, macroeconomic data from China that came in better than expected was also one of the factors that positively affected silver.

With the rise in fears that the Israel-Palestine conflict could affect oil supply, the barrel price of Brent oil completed the week with a 1.4% increase at 91.3 dollars.

The US administration suspended some sanctions it had imposed on Venezuela's oil, natural gas, and gold sectors after the government in Venezuela reached an agreement with the opposition to hold elections in 2024.

The American Petroleum Institute announced that the country's crude oil stocks were estimated to have fallen by 4 million 383 thousand barrels in the previous week. Market expectations were for a decrease of 1 million 267 thousand barrels in stocks.

Iran's call for Muslim countries to impose an oil embargo on Israel was also effective in the upward movement of Brent oil prices.

The price of natural gas traded on the New York Mercantile Exchange decreased by 10.4%.

VOLATILITY INCREASED IN BASE METALS

Volatility dominated the base metals market due to ongoing concerns regarding global economic activity.

In the over-the-counter market, copper lost 0.5%, zinc 0.7%, and aluminum 0.8% in value, while lead gained 2.3% and nickel 0.8%.

With the production of Rio Tinto, one of the world's largest copper producers, exceeding expectations in the 3rd quarter and concerns about the Chinese economy remaining strong, the pound of copper tested its lowest level since November 4, 2022, at 3.5185.

Analysts noted that copper's signals regarding economic activity in the markets are important due to its wide range of uses, and stated that although the increasing supply played an important role in this loss of value, the slowing economic activity worldwide was effective in the downward trend in copper.

A MIXED COURSE STOOD OUT IN THE AGRICULTURAL COMMODITY GROUP

Products in the agricultural commodity group followed a mixed course last week.

While wheat traded on the Chicago Board of Trade increased by 0.8%, corn by 0.5%, and soybeans by 1.7%, rice recorded a 0.8% decrease.

Cocoa prices increased with signs that global cocoa demand is strengthening. The Professional Coffee and Cocoa Exporters Group (GEPEX) in Ivory Coast reported that cocoa processing in the third quarter was 183 thousand 731 metric tons, a 7% increase compared to the previous year. These developments increased the demand for cocoa.

Sugar prices fell after news that India would not face any sugar shortage in the domestic market. Analysts said that the possibility of the country continuing sugar exports remains, which reduced concerns about sugar.

Last week, while coffee traded on the Intercontinental Exchange, a commodity exchange operating in the US, completed the week with a 6.9% gain and cocoa with a 5.9% gain, cotton recorded a 4.2% decrease and sugar a 0.7% decrease.

On the other hand, expectations of a production deficit in the new season in the coffee market caused price increases.

The International Coffee Organization (ICO) estimates a production deficit of 7.3 million bags in the 2022/23 season.