In the week that ended in commodity markets, expectations that the US Federal Reserve (Fed) could keep interest rates constant this month and the withdrawal of bond interest rates supported gold and silver, while developments in the Middle East and hurricane-induced production outages had an impact on energy prices.
Signs of cooling in the labor market in the USA caused expectations for the Fed's interest rate hike to be postponed to December. In the money markets, the possibility of the bank keeping the policy rate constant at the October meeting came to the fore.
Minutes of the Fed's September 15-16 meeting revealed that most officials deemed it appropriate to raise additional interest rates by the end of the year. While the minutes pointed out the effects of the increase in energy prices and strong demand on inflation, it was emphasized that future decisions would depend on the data to be announced.
Speaking at the Istanbul Economic Forum, Fed Board Member Christopher Waller also stated that additional interest rate increases may be required to reduce inflation to the 2 percent target. Stating that there is flexibility in the timing of the increases, Waller said that it is not mandatory to increase interest rates at every meeting.
The selling pressure in the bond market eased somewhat in the week that saw the US Treasury's $6 billion bond repurchase. The US 10-year bond interest completed the week at 5.25 percent, after reaching 5.36 percent on Wednesday, October 7.
The dollar index increased by 0.3 percent on a weekly basis and rose to 102.2. Although the strong course of the dollar put pressure on metals, the decline in bond interest rates from their peaks during the week supported the recovery in precious metals.
Buying from low levels benefited gold and silver
Precious metals followed a fluctuating course throughout the week depending on interest rate expectations. High bond yields have increased the alternative cost of holding non-interest-bearing metals, while the strong dollar has increased purchasing costs for investors using other currencies.
The ounce price of gold hit its lowest level since August 5 on Wednesday. Data released in China showed that the central bank increased its gold purchases in September, carrying the series of purchases to the 23rd month in a row.
With the strengthening of purchases from low levels in the last two trading days, gold ended the two-week series of declines and completed the week on a positive note.
Analysts stated that high bond interest rates reflect concerns about indebtedness, noting that these concerns may support the demand for gold and that the lack of a predetermined path for monetary policy increases volatility in the gold market.
The pressure caused by high interest rates was also felt in silver in the middle of the week. In the evaluation published by GCM Investment during the week, it was stated that bond yields and energy-related inflation concerns suppressed silver, and the expectation that the Fed would keep interest rates constant in the short term could limit losses.
With the purchases spread to precious metals on Friday, October 9, silver also recovered and completed the week with an increase.
With these developments, the prices of precious metals on an ounce basis increased by 1.3 percent for gold and 0.7 percent for silver, while they decreased by 1.6 percent for palladium and 0.5 percent for platinum.
China's demand expectations and supply risks in mines supported copper
In base metals, Chinese buyers' return to the market after the holiday and concerns about production in copper mines came to the fore. The strong dollar and high energy costs limited the increases.
The Yangshan premium, which shows China's demand for imported copper, reached $125 per ton on Thursday, October 8, reaching its highest level since November 2022. The ongoing strike at the Centinela mine in Chile has also increased supply risks.
Analysts stated that the expectation that Chinese buyers will replenish their stocks after the holiday supports copper, and that low stocks and supply risks in mines are also effective in pricing.
On the other hand, while the rise of the dollar during the week brought sales in base metals, aluminum hit its lowest level in three months on Thursday on the London Metal Exchange.
In base metals, prices on a pound basis in the over-the-counter market in the completed week increased by 2.1 percent in copper, 1.2 percent in zinc and 0.7 percent in lead, while they decreased by 2.1 percent in aluminum. The price of nickel remained flat.
Supply risks and hurricane in Middle East support energy prices
Conflicts in the Middle East and the slowdown in tanker traffic in the Strait of Hormuz have increased concerns about energy supply. The effects of Hurricane Isaias on oil and natural gas production in the US Gulf of Mexico were also closely monitored.
According to the assessment published by the US Energy Information Administration (EIA) on Friday, approximately 1.3 million barrels of daily oil production was disabled as of Thursday, as platforms were evacuated and activities were stopped before the hurricane. Cuts in natural gas production also increased supply concerns.
US President Donald Trump's statement on Friday that talks with Iran were productive and the news that China will restart refined petroleum product exports limited the rise in oil prices.
Trump also announced that they reached an agreement with Russian President Vladimir Putin on diesel supply. According to the statement, Russia will supply over 300 thousand tons of diesel to the US and global markets in the first phase, an additional 500 thousand tons in November and then 1 million tons. Following the news flow, diesel futures prices in the US fell.
Despite the production cuts in natural gas, the stock increase was the factor that limited the rise. According to data released by EIA on Thursday, natural gas stocks increased by 85 billion cubic feet in the week ending October 2, reaching 3 trillion 500 billion cubic feet. Stocks were 2 percent above the 5-year average.
However, on a weekly basis, the price of December term natural gas in British thermal units increased by 5 percent, while the barrel price of December term Brent oil completed the week with an increase of 2.12 percent.
USDA forecasts and weather conditions differentiate agricultural commodities
In agricultural commodities, expectations regarding the impact of the hurricane on the harvest came to the fore with the World Agricultural Supply and Demand Estimates Report published by the US Department of Agriculture (USDA) on the last day of the week.
USDA's increase in corn production and yield estimates increased sales pressure. The department increased its end-of-season corn stock estimate by 282 million bushels.
The lowering of the US export forecast for wheat and the increase of the end-of-season stock expectation to 740 million bushels put pressure on prices. In rice, the downward revision of US production and end-of-season stock forecasts provided support to prices.
Although the increase in production forecast for soybeans brought sales in the first transactions on Friday, strong demand enabled the prices to recover.
With these developments, the price of rice per hundred pounds on the Chicago Mercantile Exchange increased by 3.8 percent. Prices per bushel increased by 1.1 percent for soybeans, while they decreased by 3.5 percent for corn and 1.8 percent for wheat.
In sugar, rains in Brazil disrupted harvesting and processing activities, and expectations that El Niño could reduce production in Asia came to the fore. In coffee, Brazil's increasing exports indicated that the supply was strengthening and put pressure on prices.
While prices on a pound basis at the Intercontinental Exchange in the USA increased by 1.9 percent for cotton and 1.7 percent for sugar, there was a 1.3 percent decrease for coffee. The price per ton of cocoa also completed the week with a horizontal trend.
