Commodity Roundup: Precious metals mixed, oil down; grain short extends further

Gold prices fell at the start of the week against a stronger dollar and uptick in the benchmark U.S. 10-year bond yield, as as traders pared back bets for aggressive rate cuts by the Federal Reserve this year following Friday’s solid U.S. jobs report. Spot gold (XAUUSD:CUR) was down -0.70% to $2,024.41 an ounce by 6 am ET.

Treasury yields rose further on Monday after Fed Chair Jerome Powell said the central bank could “give it some time” before cutting interest rates, which dented the appeal of bullion despite raging tensions in the Middle East, which usually tends to support gold as a safe haven.

The main event on the economic calendar today is the ISM non-manufacturing survey due later in the day, which will give a sense of the health of the U.S. economy in January.

In the energy complex, oil prices inched lower, reversing gains made earlier in the session, as traders monitored developments in the Red Sea. The U.S. has vowed to step up its retaliatory strikes on Iran-backed groups in the Middle East and as Ukrainian drones struck southern Russia’s largest refinery. Both benchmarks ended last week down about 7% on progress in ceasefire negotiations between Israel and Hamas and strong jobs report.

Global shipping prices are trending higher as problems traversing the Suez and Panama Canals are making journeys longer and more expensive. This is also indirectly impacting shipping on other routes, such as NZ-Asia, due to the reduced supply of ships and containers. The Baltic Dry Index, which tends to be the most volatile of the shipping indices, has trended down since spiking in December, ANZ reported.

Meanwhile in the base metals space, prices of most commodities were weighed down by fading imminent rate cut hopes, and uncertain demand situation in top consumer China. Spot trade in China slowed down recently as market participants gradually started the Lunar New Year holiday, which will officially kick off on Saturday, Reuters reported. Base metals are in for a subdued 2024 with weak demand damping any bullish supply pressures, the latest Reuters poll of analysts showed. However, the copper market was underpinned by raw material supply disruption, it added.

Elsewhere in the agricultural market, soybean and wheat futures ticked lower, while cocoa gained.”

Broad grains sector selling extended to a seventh week, during which time the BCOM grains index slumped by 8%. In the last reporting week, the hedge fund net short reached a fresh May 2019 high at 563k lot with wheat so far, the only contract showing signs of easing selling pressure. The nominal value of the corn and soybeans net shorts both exceeding $6 bn, Saxo Bank reported.