Commodity prices depreciated significantly as the dollar strengthened after concerns about rising inflation on Friday.
Commodity performance, as measured by the 23-member Bloomberg Commodity Index, fell the most sharply since April as a stronger dollar reduced the attractiveness of currency-priced commodities. Meanwhile, the surge in US government bond yields earlier this week raised concerns that accelerating inflation could lead to easing of support for monetary policy.
“Nobody expects a crash in the bond market and it’s breaking everything,” said Edward Moya, senior market analyst at Oanda Corp. “We see risk assets fully resolved. The current move is panic sales. “
Hedge fund bets on rising commodity prices fell after a record for the fifth consecutive week in 2011 data, according to Bloomberg analysis of 20 commodity data from the Futures Trading Commission. of Raw Materials and ICE. Some investment banks have recently written that commodities are entering a new structural bull cycle. Some even said it could be the beginning of a supercycle. However, rising US yields on Thursday raises concerns that the supportive monetary approach that has helped ignite recent increases in commodity prices will not continue, despite central bank statements to the contrary.
Meanwhile, losses in the different commodity markets are also determined by their own factors.
Oil and natural gas
While oil prices have risen since the beginning of the year and even November, they fell on Friday. In addition to the strengthening of the dollar, expectations that OPEC + will bring more supply to the market also put pressure on prices. While the producer alliance is widely expected to ease production constraints, uncertainty remains about how much production can increase and whether demand will be strong enough to absorb it.
Gasoline prices fell for the seventh day on Friday, making it the longest losing streak since October 2019. Futures are down nearly 14% since the February 17 peak. After Texas cold shock production rebounded rapidly with rising temperatures, demand for heating oil fell by a fifth last week.
Metals and agriculture
Copper saw the steepest drop since October, from a nine-year high on Friday. Gold suffered its worst month since late 2016, prolonging its declines.
Considered an indicator of economic activity, copper approached the record level a decade ago, following bets that the recovery of the economies and the support of the central bank would further restrict supplies. While some analysts say prices may rise much higher, news that semi-finished materials shortages will ease due to sharp increases last week and more supplies heading to China may have left copper vulnerable to correction.
Investors worry that faster inflation could trigger a pullback in incentive support, but Fed officials stressed there are no plans to tighten policy ahead of time. For gold, higher interest rates in the United States and optimism about the economic recovery reduce the attractiveness of the metal.
Chicago bean and soybean futures retreated as market supporters paused on concerns that higher prices could begin to reduce demand. Rising Chinese imports and global climate concerns had pushed futures to multi-year highs. Prices fell on Thursday and Friday, following weekly US export sales that fell well below analysts’ expectations.