The impact of the US/Israel-Iran War on commodity markets: Sharp decline in precious metals

The start of the US/Israel-Iran War led to violent fluctuations in commodity markets. While gold, silver and platinum prices, which reached their historical peaks in the first month of the year, turned downwards due to the effect of the war, palladium was also affected by this decline. The Fed's increase in the policy rate by 25 basis points to the range of 3.75-4 percent for the first time since 2023 and Fed President Kevin Warsh's emphasis on fighting inflation strengthened the expectation that interest rate increases will continue. This situation created selling pressure in the bond markets, increased the demand for the dollar and triggered the decline in precious metals.

GOLD BACK FROM RECORDS

An ounce of gold, which started the year at $4,313, broke a record by testing $5,600 in January. Gold, which closed January with a 12.4 percent gain at $4,849 and February with an 8.5 percent increase at $5,263, lost 11.32 percent in value in March, falling to $4,667 following the developments in the Middle East. This decline was recorded as the steepest monthly decline since the 2008 crisis.

Gold, which continued its decline in April (1 percent) and May (1.77 percent), completed June with a sharp loss of 11.7 percent at $4,007, causing its investors to lose 7.1 percent in the first half of the year. An ounce of gold, which signaled a recovery by increasing 1 percent ($4,044) in July and gained 10 percent in value in August, recording its fastest rise since January, decreased again by 6.6 percent in September to $4,157. Gold completed the 9-month period with a total loss of 3.6 percent.

9-MONTH LOSS IN SILVER IS 14.8 PERCENT

An ounce of silver started the year at $71 and rose to $121.7 in January, breaking a historical record. Silver, which reached 93.8 dollars with the increases in January (17.3 percent) and February (12.6 percent), fell to 61 dollars in March due to the effect of the war and closed the month with a 19.9 percent decrease. Silver, which recovered at the end of May after a 1.9 percent decrease in April and increased by 2.2 percent to 75.3 dollars, fell to 58.7 dollars with a huge loss of 22 percent in June.

Silver closed the first half of the year with a loss of 17.3 percent; It ended July with a 1.7 percent decrease, August with a 13.5 percent increase, and September with a 7.6 percent decrease ($60.5). The total value loss of silver in 9 months was 14.8 percent.

SHARP DECLINE IN PLATINUM AND PALLADIUM

Platinum, which started the year at 2,054 dollars due to global supply problems, reached a record level of 2,923.3 dollars in January. Platinum, which closed the first two months with an increase, lost 17.2 percent of its value in March, falling to 1,960.1 dollars due to the impact of geopolitical risks and the strengthening dollar. Platinum follows a fluctuating course; After increasing in April and decreasing in May, it decreased by 19.2 percent to 1,553 dollars in June. Platinum, which lost 24.4 percent in value in the first half of the year, lost 4.6 percent in September despite its recovery in July (6.1 percent) and August (8.9 percent) and completed the 9-month period with a 16.7 percent decrease.

Palladium, which started the year at $1,603, dropped by 17 percent in March to $1,484.8 after the increases in January and February. It lost 11.4 percent of its value in May and 10.8 percent in June, causing its investors to lose 24.2 percent in the first half. Following the rises in July and August, palladium closed September with a decrease of 11.1 percent at $1,211.2, and its total value loss in the 9 months was 24.4 percent.

'OIL PRICES MUST FALL FOR INCREASE'

Futures and commodity markets expert Zafer Ergezen emphasized that one of the most important reasons for the loss of value in precious metals is high oil prices. Ergezen stated that geopolitical risks resulting from the closure of the Strait of Hormuz pushed up oil prices and therefore bond interest rates, and stated that strong inflation expectations necessitated interest rate increases.

Ergezen said that the Fed is expected to increase interest rates at least one more time and made the following assessment:

"Increasing interest rates reduce liquidity in the market, leading to a slowdown in global growth. At the same time, the dollar index is strengthening. Selling pressure on precious metals continues as money turns to deposits and interest. We are unlikely to see an upward trend on this front until interest rate cuts begin or expectations increase. In order to see an upward trend in precious metals again, the war must end, oil prices must fall and bond interest rates must retreat."