Upcoming Federal Reserve Comments To Stimulate Commodity Prices

Although commodities reached new highs earlier this month, they appear to have lost some of their impetus as a result of the US dollar’s resurgence and growing growth fears. Gold experienced its first dip in five weeks after rising rapidly and scaling the important USD 1,800 per troy ounce mark. Over the past few weeks, zinc led the industrial metals sector and hit June highs, but it has since fallen from those levels. Crude oil experienced a significantly divergent pattern as it fell to lows in January, but it has since rebounded by almost 5 per cent.

In recent days, the US dollar has struggled as discussion about the Federal Reserve’ monetary policy has heated up. The Federal Reserve increased interest rates by 0.75 per cent in July, mirroring the increase from the previous meeting. The Federal Reserve’s pause raised the question of whether the central bank would slow down due to the detrimental effects of rate hikes on economic activity or would continue with its aggressive inflation control policies.

In other developments, market experts believe that silver was ready for a rebound and may outperform gold in the years to come after prices fell to two-year lows, causing India’s imports of silver to triple from a year ago to record highs in 2022. According to preliminary data from the Ministry of Commerce and Industry, silver imports rose to 5,100 tonnes in the first seven months of 2022 from just 110 tonnes in the corresponding period the previous year.

The continuous discussion between inflation and economic growth was highlighted in the minutes of the July meeting, which were made public this week. According to the minutes, Federal Reserve officials recognised the need to eventually slow the rate of interest rate increases and warned against overtightening while also highlighting the danger of inflation becoming ingrained. Increased uncertainty is further highlighted by the Federal Reserve officials’ conflicting views. James Bullard, President of the St. Louis Federal Reserve, stated that he is in favour of a third consecutive 75 basis point increase in interest rates in September.

"Silver was ready for a rebound and may outperform gold in some years after prices fell to two-year lows, causing India’s imports of silver to triple from a year ago to record highs in 2022."

Esther George, President of the Kansas City Federal Reserve, stated that the timing and extent of rate increases are still up for debate. China has been under pressure as virus-related regulations have slowed down economic growth and the real estate market has remained unstable. Due to China’s opposition of trade discussions between the US and Taiwan, geopolitical tensions between the two countries are at an all-time high. In addition, Indonesia has revealed that Russian President Vladimir Putin and Chinese President Xi Jinping will attend the G20 Summit in Bali this November.