Wavering Commodity Trade To Continue

In the past fortnight, commodities fluctuated between gains and losses as increased expectations of a less drastic rate hike by the Federal Reserve offset weakness brought on by a grim economic outlook.

The dollar index weakened last week as most US economic data pointed to a weakening economy, adding flare to the rumours that the Fed may ease off on the pace of tightening monetary policy. 

Additionally, the remarks made by Mary Daly, President of the Federal Reserve Bank of San Francisco, suggesting that the Fed should refrain from raising interest rates too sharply and that it is time to start discussing slowing the pace of the hikes in borrowing costs, suggested that there may be some debate among Fed officials about whether to slow down aggressive rate hikes after the November meeting.

In the last week, COMEX gold and silver traded in a constrained range as a weaker dollar served as a buffer against falling investment demand. The WTI crude oil has risen in price thanks to strong exports and active refineries in the US.

According to the Weekly Petroleum Status Report for the week ending October 21, US crude exports soared to a weekly record of 5.129 million barrels per day, while refineries ran at a record-high 88.9 percent of their operable capacity. The statement by Vitol, the largest independent oil trader in the world, that it sees symptoms of damage in oil demand also affected mood. Despite shale companies' claims that production will not increase in the foreseeable future, US oil output increased to about 12 million barrels per day (bpd) in August, the highest level since the COVID-19 outbreak began. This has put pressure on oil prices.

"Despite shale companies' claims that production will not increase in the foreseeable future, US oil output increased to about 12 million barrels per day (BPD) in August, the highest level since the COVID-19 outbreak began."



According to the World Gold Council (WGC), central banks purchased a record 399 tonnes of gold for around USD 20 billion in the third quarter of 2022, which helped to increase demand for the metal globally. In the WGC quarterly report, it showed that demand for gold was also high from jewellers and consumers of gold bars and coins, while exchange traded funds (ETFs) that store bullion for investors declined. 

Although many financial investors sold shares in gold-backed ETFs. Gold prices fell 8 per cent in the third quarter as a result of ETFs selling off bullion, but this price decline also helped boost jewellery demand. Among large buyers were the central banks of Turkey, Uzbekistan, Qatar and India.

In the past fortnight, LME base metal prices fluctuated despite Chinese President Xi Jinping's new team, which is made up entirely of his supporters, making it clear that he still backs the COVID zero policy. Aside from that, China's third-quarter GDP increased by 3.9 per cent year over year, above expectations. However, despite this economic resurgence, year-to-date growth is still only 3 per cent, much behind the official objective of about 5.5 per cent, which hasn't been able to assuage investor concerns.