Commodity prices see increases due to geopolitical tensions, Fed’s inflation policies
Date
11/26/2024 7:33:58 AM
(MENAFN) Commodity prices saw broad increases last week, driven by ongoing geopolitical tensions and rising concerns surrounding the US Federal Reserve's inflation policies. The surge in the US Dollar Index has complicated market estimates, raising fears that the Fed may take longer than anticipated to tackle inflation. This uncertainty has prompted market participants to reassess future monetary policy, with some Fed officials warning that the recovery from inflation could stall. As a result, the likelihood of rate cuts in the upcoming months dropped significantly, from an 82 percent chance to just 52 percent, further heightening market volatility.
The geopolitical backdrop also played a crucial role in driving commodity demand. Russia's threats of nuclear retaliation against Ukraine, following the country’s use of US-supplied Army Tactical Missile Systems (ATACMS), intensified the flight to safe-haven assets. Precious metals like gold saw a notable surge, with prices rising 6 percent per ounce last week, marking the highest weekly increase since March 2023. Despite the increasing cost of holding gold, analysts remain bullish on its future prospects, citing expectations that central banks will pursue more cautious monetary policies to navigate inflation and economic slowdowns.
According to analysts from UBS, gold prices are expected to continue climbing in 2025 as central banks lean towards more measured approaches in managing inflationary pressures and economic deceleration. This outlook, coupled with the ongoing geopolitical risks, has helped bolster the demand for gold as a store of value. Meanwhile, the US Dollar Index reached a two-year high, adding to the complexity of global markets and contributing to the overall uncertainty.
Other precious metals also experienced gains last week. Silver rose by 3.6 percent after the United Nations committed to financing USD300 billion annually to address climate change, which is expected to have a significant impact on the silver market. Palladium saw a 6.1 percent increase following the announcement of a major discovery in Australia, one of the largest palladium mineral systems in the country, by geology explorers Earth AI and Legacy Minerals. Platinum also saw positive movement, rising 2.3 percent, reflecting the broader positive trend in the commodities market.
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