Commodity markets plummeted last week, led by metals, with expectations of strong interest rate hikes from central banks, coronavirus shutdowns in China and recession concerns in economies.
In commodity markets, the steep declines last week were dominated by metals, with expectations of large interest rate hikes from major global central banks, the closure of the corona virus in China and fears of a recession in economies. .
With quarantine measures put in place as part of the coronavirus outbreak in China last week and growing recession concerns after weak manufacturing industry data announced globally, the dollar index has hit the limit of 110 and has tested its highest level since June 2002.
The rise in the dollar was among the important factors that negatively impacted the commodity markets. Analysts said dollar demand rose globally with the expectation that the aggressive policy measures central banks must take due to inflationary concerns could push already slowing economies into recession and said the pressure on commodity prices continued in this direction.
Pointing out that the European Central Bank (ECB) is expected to raise interest rates by 75 basis points, analysts said that due to turmoil in China’s real estate sector, economists’ expectations for the country’s economy for 2022 have gotten worse.
STOCKED CLOSING MARKET IN CHINA
The decision to close parts of China comes as the country enters its peak construction season in September and October. With these developments, the steep declines last week were dominated by metals in the commodity market.
Analysts stressed that China’s demand for construction steel will be challenged by the speed with which re-emerging epidemics can be eliminated and the severity of quarantines that will affect commercial activities.
In the counter market, copper and aluminum fell by 7%, zinc by 12.6%, nickel by 4.2% and lead prices by 4.6%. In copper, concerns about the energy crisis in Europe, the Fed’s messages that tight monetary policy will continue and China’s “Zero Covid” strategy continue to escalate.
Concerns about copper demand are offset by continued slowness on the supply side. Chile, which manages more than a quarter of the world’s copper mining, recorded a drop in production of 8.6% in July compared to the previous year.
HARD FALL OF PRECIOUS METALS AND ENERGY
Precious metals also fell by more than 4% last week. Gold fell by 1.5% and palladium by 4%. Silver, which saw its lowest level since June 2020 at $ 17,562, fell 4.5%, while Platinum, which saw its lowest level since July 2020 at $ 821.95, lost. 3%.
On the energy side, the price per barrel of Brent oil fell by 6 percent and the price of natural gas traded on the New York Mercantile Exchange fell by 4.2 percent. Concerns that aggressive interest rate hikes will slow economies and reduce fuel demand and tightening Kovid-19 measures in China have been effective in lowering prices.
DEMAND CONCERNS GROW FROM AGRICULTURE
Last week, sharp drops were also effective on the agricultural side. Wheat traded on the New York Mercantile Exchange gained 0.5%, while a horizontal trend was observed in corn. Soy prices also fell by 2.8%. Cotton fell by 12.3%, coffee by 4.1%, sugar by 1.8%, cocoa by 0.3%.
Analysts said that with aggressive statements from the world’s major central banks, fears about demand for agricultural commodities, especially cotton, have increased. (AA)