Commodity rates rise as Fed’s rate cut

9/25/2024 8:17:32 AM

(MENAFN) Last week, commodity markets experienced a notable upward trend following the Federal Reserve’s decision to cut interest rates by 50 basis points for the first time in four years. This move has reignited expectations of a potential soft landing for the economy, positively influencing market sentiment.

During the September meeting, Fed Chairman Jerome Powell indicated that while upside risks to inflation have decreased, downside risks to employment have increased. This shift in perspective has contributed to a heightened risk appetite among investors, sparking interest in various commodities.

Among precious metals, gold stood out as a key performer. The price of an ounce of gold surged to a record high of USD2,658.80, reflecting a 1.7 percent increase. Analysts suggest that the Fed’s rate cut, along with central bank purchases, could propel gold prices to as high as USD2,900. The prevailing low interest rates have diminished the opportunity cost of holding gold, which does not yield interest. Meanwhile, silver also saw gains, with its price rising 1.5 percent last week.

In contrast, other precious metals faced declines, with platinum dropping 2 percent and palladium seeing a slight decrease of 0.1 percent.

Turning to base metals, the price of copper rose significantly, climbing 2.7 percent over the week. This increase was fueled by optimism regarding rising demand, spurred on by the Fed's rate cut. Additionally, aluminum prices increased by 0.8 percent amid concerns over potential supply disruptions. Reports of a water storage pool collapse at an aluminum oxide refinery in India have further compounded these supply worries.

Nickel prices also experienced a boost, rising by 3.4 percent, while lead saw a marginal increase of 0.1 percent. On the other hand, zinc prices fell by 1.2 percent, reflecting varying dynamics within the commodity markets.

As these developments unfold, the interplay between Federal Reserve policies and global economic conditions will continue to shape commodity price trends moving forward.

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