Pricing for potential interest rate cuts positively impacts the commodities market

The commodities market, which saw uncertainties and selling pressure that had persisted for weeks give way to a rise the previous week, also saw notable gains last week.

Pricing regarding the possibility that the US Federal Reserve (Fed) could begin interest rate cuts by May of next year at the latest, and the strengthening of the "soft landing" probability, continue to positively affect the commodities market.

In money market pricing, while it is considered a certainty that the Fed will keep interest rates steady at its first meeting next year, the probability of the bank starting interest rate cuts in March has risen to 85 percent.

According to data released last week, the US economy grew by 4.9 percent in the third quarter of this year, below expectations. Despite the number of people filing for unemployment benefits for the first time in the country rising to 205 thousand in the week ending December 16, it remained below market expectations.

The core personal consumption expenditures price index, which the Fed considers as an inflation indicator and excludes food and energy items, increased by 0.1 percent on a monthly basis and 3.2 percent on an annual basis in the same period. The index recorded its slowest annual increase since April 2021.

Market expectations were for the core personal consumption expenditures price index to increase by 0.2 percent monthly and 3.3 percent annually. The index had increased by 0.1 percent monthly and 3.4 percent annually in October.

Analysts stated that the slowdown in the core personal consumption expenditures price index, which is the Fed's inflation indicator, points to the continuation of the downward trend in inflation.

Upward trend prevailed in precious metals, with the exception of palladium

While an upward trend stood out in precious metals last week, excluding palladium, gold gained 1.7 percent, silver 2.6 percent, and platinum 2.9 percent, while palladium lost 0.3 percent in value.

Analysts noted that concerns that world economies could remain trapped between inflation and recession are gradually being priced out, and that the decline in bond yields to their lowest level in the last 5 months has reduced the alternative cost of gold.

The fact that durable goods orders in the US increased by 5.4 percent on a monthly basis in November, exceeding market expectations, was also among the important factors in the rise of silver prices.

An upward trend also prevailed in base metals last week.

In the over-the-counter market, copper recorded a 1.4 percent increase, lead 2.5 percent, aluminum 3 percent, nickel 1.6 percent, and zinc 2.3 percent.

Low processing fees negotiated between Chinese smelters and miners for next year's deliveries have increased supply concerns for copper.

Although Chinese smelters hoped for a change in the fees for converting concentrates into refined metal, which were 88 dollars per ton and 8.8 cents per pound, they agreed to reduce these fees to 80 dollars and 8.0 cents, respectively, for 2024.

This decline, which occurred for the first time in the last three years, fuels concerns that supply shortages may emerge in copper markets.

While restocking efforts in China and increasing physical demand also positively affect copper prices, analysts noted that moves toward renewable energy, which are expected to increase globally, could also reflect positively on copper demand.

Looking at the energy group, Brent oil closed the week with a 3.7 percent increase, and natural gas traded on the New York Mercantile Exchange closed with a 3.5 percent increase.

Oil prices continue their rise under the influence of Israel's attacks on the Gaza Strip, rising tensions in the Middle East, which holds most of the world's oil reserves, and actions targeting ships in the Red Sea. Abdul-Malik al-Houthi, the leader of the Houthis in Yemen, threatened in a televised statement on November 14 that they could target Israeli ships in the Red Sea. Gideon Golber, the CEO of the Port of Eilat in southern Israel, stated that the port's operations have decreased by 85 percent since the start of attacks by the Houthis in Yemen on ships connected to or cooperating with them in the Red Sea.

Following the actions of the Houthis, many shipping companies decided to stop their voyages in the Red Sea. After the British energy company bp announced during the week that it would stop all tanker traffic in the Red Sea, concerns have increased that the problem, which has so far mostly affected the transport of goods, could expand to include energy shipments.

Experts state that supply disruptions and potential risks that could be caused by conflicts in the Middle East could lead to serious fluctuations in oil markets.

Gas prices also rose as US weekly natural gas stocks decreased more than expected.

- Cocoa refreshed its peak

A mixed trend was observed in the agricultural group last week.

While wheat traded on the Chicago Board of Trade lost 2.6 percent, corn 2.2 percent, and soybeans 2.1 percent, rice gained 1 percent.

Cotton traded on the Intercontinental Exchange, a commodity exchange operating in the US, rose 0.1 percent, coffee 2.1 percent, and cocoa 1.1 percent, while sugar decreased by 7.5 percent.

Cocoa refreshed its peak last week at 4 thousand 334 dollars per ton.

Coffee prices are also supported by concerns that the ongoing dry weather in Brazil will negatively affect the coffee crop.

Cocoa prices have also strengthened recently due to concerns regarding cocoa supply. It is estimated that the cocoa shipped to ports by farmers in Ivory Coast decreased by 33 percent to 671 thousand 544 tons between October 1 and December 17 compared to the same period last year.

News Source: 12punto