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Gold prices (XAUUSD:CUR) ticked higher for a second-consecutive session on Friday, as the U.S. dollar index (DXY) eased, although the metal was headed for a weekly fall after recent jobs data suggested there’s less need for the Federal Reserve to cut interest rates. Markets took big bets at the end of last year that the Fed would be cutting deeply in 2024, starting as early as March. Ahead of the FOMC blackout period that starts at the end of this week, Fed speakers have not leaned towards endorsing an early rate cut. A similar theme emerged from the latest gathering of the world’s political and business elites in Davos, Switzerland.
Metals and energy edged higher on a softer USD, although weakening expectations of an early rate cut continue to weigh on sentiment. Supply-side issues were also in focus as cost pressures rise, ANZ said in a note.
Turning to the energy market, oil prices also moved higher, with both benchmarks headed for a weekly gain, as economic concerns in China, the largest importer of crude oil, were countered by Middle East tensions and oil output disruptions caused by a cold snap in the United States. The cold snap has knocked out 15% of U.S. Gulf Coast oil-refining capacity, Bloomberg reported.
JPM Commodities Research however said, it estimates that there is no geopolitical premium in the oil price today despite the US-led strikes on Yemen’s Houthi rebels, who have been attacking shipping passing through the Red Sea, generating threats of strong response. “In part, this likely reflects that the global oil impact of shipping disruptions in the Red Sea is likely to be small and easily handled.”
Sentiment in the base metals market also remained upbeat against a weaker dollar, which made greenback-priced metals cheaper to holders of other currencies. Copper, however, was set for a weekly fall on weak Chinese economic data.
Elsewhere among agriculture commodities, soybean, wheat and cocoa ticked up. Factors such as the ongoing war, low prices, crop uncertainty, population growth, and supply-demand deficit support the bullish case for wheat prices in 2024, Andrew Hecht, a Wall Street veteran covering commodities and precious metals noted.
There are the signs of food inflation cropping up, from coffee — which is taking a direct hit from Red Sea trade disruption — to chocolate, where output has slowed to Covid-era levels amid a cocoa shortage that has pushed futures to a four-decade high, Bloomberg reported.
Recent trade numbers from China Customs show that corn imports jumped more than 470% YoY to 4.95mt in December, while cumulative imports rose 31% YoY to 27.1mt over the last year, an ING article said.
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