Inflation concerns rise amid soaring commodity price

Ongoing geopolitical risks continue to drive an upward trend in commodity prices, sparking concerns over the rising U.S. Dollar Index, which could potentially limit the Federal Reserve’s efforts to combat inflation.

Some Fed officials warned that the inflation’s recovery period may stop, as the rate cut estimates for next month fell from 82% likelihood to 52% in the money markets. Meanwhile, Russia’s threats of nuclear retaliation on Ukraine due to its use of U.S.-supplied long-range missiles, the Army Tactical Missile System (ATACMS), gave rise to the demand for safe-haven commodities, such as gold, among others.

Latest situation in precious metals

Analysts from Swiss investment bank UBS said that central banks will adopt a more moderate monetary policy against inflationary pressures and the slowdown in economic growth, expecting gold prices to continue rising in 2025. Meanwhile, the U.S. Dollar Index reached a two-year high of 107.507.

• Gold rose 6% per ounce last week, the highest weekly increase since March 2023, despite the rising alternative cost of gold.
• Silver climbed 3.6% last week after the U.N. pledged to finance $300 billion annually to combat climate change at the COP29 climate action event held in Baku, as it is estimated to significantly influence the silver market.
• Palladium increased 6.1% after geology explorers Earth AI and Legacy Minerals discovered one of Australia’s largest palladium mineral systems.
• Platinum rose 2.3%.
• Aluminum climbed 0.9% per pound last week as China’s Finance Ministry eliminated the 13% tax rebate on aluminum exports, effective from Dec. 1. Analysts stated that this would mean the potential loss of over 5 million tons of Chinese aluminum annually in the international markets.
• Copper increased 0.6% after China’s decision as it also includes copper exports.
  Nickel rose 0.8% after Indonesia increased its nickel ore supply to protect small local miners. At the same time, lead climbed 0.5% and zinc 0.6% last week.

Nuclear crisis leverages energy prices

In the energy sector, analysts warn that Russia’s escalating aggression against Ukraine, including nuclear missile threats and hypersonic missile testing, could lead to the destruction of oil, gas facilities, and refineries, causing long-term damage and potentially further escalating the war.

The U.S. imposed new sanctions on Russia to block Russian gas exports.

Meanwhile, India’s oil imports increased as domestic consumption rose.

• Brent crude oil soared 5.2% per barrel last week
• Natural gas traded on the New York Mercantile Exchange hiked 14.4%.

Agricultural goods on the rise

At the same time, the agricultural group saw increases across the board except for corn and sugar.

• Soybean prices increased by 1.4%
• Rice prices surged by 3.7%, and corn followed a horizontal course on the Chicago Mercantile Exchange last week.
• Coffee reached an all-time high, rising 5.9%.
• Cotton increased by 2.2% per pound.
• The ton price of cocoa soared 5.4% and sugar went down 1% per pound over the same period.

Wheat rose 1.9% per bushel last week as U.S. and Black Sea farmers have been storing wheat harvested earlier in the year due to the general downward trend in prices, which led to an increase.

Global wheat stocks are estimated to fall to their nine-year low by the middle of next year, according to the U.S. Department of Agriculture.