IGI Logo

Commodities whipsaw after global equity mayhem

The COMEX Gold continuous contract swung between gains and losses on Monday as traders assessed a significant worldwide stock market decline and escalating Middle Eastern tensions. The deepening market selloff is certainly prompting some traders to liquidate gold positions to cover margin calls on other assets, but increased forecasts on Federal Reserve rate cuts and rising geopolitical risks are also supporting the yellow metal. Markets now see over a 70% chance of a 50 basis point rate cut by the Fed in September, with approximately 155 basis points of total easing priced in for this year and next.

Economists across Wall Street have started anticipating a more aggressive pace of Fed easing, with those at Citigroup Inc. and JPMorgan Chase & Co. predicting half-percentage-point moves at the September and November meetings. (Bloomberg)

WTI Crude Oil WTI crude oil futures fell below $72.5 a barrel on Monday, the lowest level in six months, amid mounting concerns about a recession in the United States, the world's largest oil user. Despite geopolitical tensions in the Middle East, including claims of Israeli airstrikes on schools that resulted in casualties, the market's attention remains on the declining demand for oil. Adding to the economic gloom, both the US and China saw a contraction in their manufacturing sectors, exacerbating fears of decreased oil consumption.

LME base metals affected by global equity and currency market volatility. Over the last few weeks, metal prices are dragged lower by worries over flagging Chinese demand. However, uncertainty over the US economy and the Federal Reserve’s need to engineer a soft landing have added to headwinds. LME Copper again dipped below $9,000 a ton fell as much 1.1% to $8,957.50 a ton before trading at $9,059 a ton in the early trade.

European natural gas prices fell up to 4.5% on Monday, following a 13% surge the previous week due to a selloff in oil and financial markets amid economic concerns. The US economy appears to be rapidly worsening, leading to a drop in global stock markets and lower oil prices.

Meanwhile in Russia, Europe’s second-biggest supplier of liquefied natural gas, signs are emerging that its Arctic LNG-2 project sanctioned by the US is starting to load fuel. Meanwhile traders are watching for a potential retaliatory strike on Israel by Iran and regional militias, which risks disrupting gas supplies to and from the region. (Bloomberg)

Above views are of the author and not of the website kindly read disclaimer