U.S. Elections and China's Economy Hamper Commodities

As central banks worldwide near the end of their battle against inflation, expectations for interest rate cuts are becoming clearer. Despite anticipations that the Federal Reserve would implement three rate cuts this year, uncertainties over the U.S. elections impacted commodity prices. 

The price of gold briefly soared to a record high of USD 2,483, fueled by expectations that the Fed would begin cutting rates in September. However, it later retreated to USD 2,400. The rising demand for the U.S. dollar negatively impacted precious metal prices. Silver and copper prices fluctuated due to concerns about demand tied to their use in green energy projects. In the past fortnight, gold lost 0.4 per cent, silver fell 5.1 per cent, platinum dropped 3.9 per cent, and palladium decreased 6.5 per cent. 

Oil prices were on the decline in the past fortnight, as investors focused on the prospect of increasing oil supplies and weak demand. Brent crude futures for September fell 9 cents to USD 82.31 a barrel, while U.S. West Texas Intermediate crude for September declined 10 cents to USD 78.30 per barrel. Traders largely ignored U.S. President Joe Biden's decision to call off his re-election bid and endorse Vice President Kamala Harris. Instead, the market focused on oil supply and demand, with Morgan Stanley analysts predicting a balance by the fourth quarter and a surplus by next year, which could drag Brent prices to the mid-to-high USD 70 per barrel range. 

China’s GDP grew by 4.7 per cent year-on-year, below expectations, while the country’s retail sales increased by just 2 per cent, the slowest rise since December 2022. Analysts suggest that the Chinese government may need to take further steps to stimulate the economy. The Chinese Communist Party has yet to implement the expected economic reforms outlined in the Third Plenary Session, leading to selling pressure on base metals. Consequently, the price of copper fell 8.1 per cent, lead dropped 3.8 per cent, nickel decreased 3.5 per cent, and aluminium slid 14.9 per cent last week. 

The Chinese Communist Party has yet to implement the expected economic reforms outlined in the Third Plenary Session, leading to selling pressure on base metals. Consequently, the price of copper fell 8.1 per cent, lead dropped 3.8 per cent, nickel decreased 3.5 per cent, and aluminium slid 14.9 per cent last week. 

Rice prices fell following news that India will lift restrictions on rice exports, easing supply concerns. Corn prices also declined due to demand concerns amid falling oil prices. Coffee prices fell as production concerns eased with increased rainfall in Brazil, while cotton and sugar prices also declined. Cocoa prices dropped significantly amid reduced supply concerns due to improved weather conditions in West Africa. The pound price of cotton traded on the Intercontinental Exchange fell 0.7 per cent, sugar dropped 2.8 per cent, and coffee decreased 4.2 per cent, while the ton price of cocoa ended the week down by 7 per cent. 

The area under kharif soybean in 2024 is 11.8 million hectares, down just 0.3 per cent from the previous year, according to a survey by the Soybean Processors Association of India (SOPA). The survey, conducted in major soybean-growing districts of Madhya Pradesh, Maharashtra, and Rajasthan, found that while the overall area under soybean this year is nearly the same as last year, there has been some shift from soybean to other crops like maize and pulses in certain areas. Conversely, some regions saw a shift to soybean from other kharif crops. In Madhya Pradesh, a top producer of the crop, the acreage under kharif soybean was 5.1 million hectares, down 1.5 per cent from the previous year, as per the survey.