ISTANBUL

Commodity prices ended last week with mixed movements, as global political and economic uncertainties persisted, while precious metals saw gains. The ongoing geopolitical tensions, coupled with market concerns about the policies of US President-elect Donald Trump, continue to weigh heavily on risk perceptions worldwide.

The US Federal Reserve is expected to implement two rate cuts this year, with the upcoming Federal Open Market Committee (FOMC) meeting anticipated to shed more light on its future monetary policy path.

The US Dollar Index hit 109.1 last week, marking its highest level since November 2022. A stronger dollar increases the cost of commodities priced in the currency, which in turn affects their demand. The yield on the 10-year US Treasury bond finished the week at 4.60%.

Precious Metals

Despite the rising dollar, precious metals recorded gains last week as their safe-haven appeal strengthened amid ongoing market uncertainties.

Gold prices rose 0.6% per ounce as the increased cost of holding non-yielding assets was offset by demand for a hedge against risk.

Meanwhile, China’s gold imports through Hong Kong more than doubled in November compared to October, reaching 33,074 metric tons (approximately 36,455 short tons), the highest level in seven months.

Silver rose 0.8%, while palladium and platinum increased by 1.3% and 2.1% per ounce, respectively.

Base Metals

Copper prices fell 1.1% per pound last week after Indonesia’s PT Freeport began discussions with the government to extend its copper concentrate exports until the completion of the Manyar smelter.

China’s Ministry of Commerce proposed new export restrictions on technologies used in the production of battery components and the processing of lithium and gallium, both critical minerals in green energy technologies.

Aluminum declined by 2.3%, nickel dropped by 0.4%, and zinc decreased by 4.2%. In contrast, lead rose by 1.1% per pound, showing resilience amid market fluctuations.

Energy Markets

In the energy sector, natural gas prices dropped 4.2% last week after Russian gas supplies to Europe via Ukraine were halted on Jan. 1, signaling a significant shift in Europe's energy landscape.

Analysts suggest this marks the end of Russia’s dominance in European energy markets.

Moldova’s Prime Minister Dorin Recean said that the gas cutoff led to widespread factory shutdowns, restricted central heating, and frequent power outages in the breakaway region of Transnistria, creating a looming security crisis.

Italy’s Energy and Environment Minister Gilberto Pichetto Fratin called on the European Union to raise the gas price cap to €60 ($62.01) per megawatt-hour to mitigate the risk of energy price spikes.

In the US, the National Weather Service warned of blizzards and heavy snowfall that could cause major power outages, further increasing natural gas demand. Kentucky and Virginia declared states of emergency ahead of an expected winter storm.

Brent crude oil prices closed last week with a 4% increase. According to the US Energy Information Administration, crude oil inventories in the country declined due to weakening demand.

Meanwhile, Ukraine’s military claimed it struck a Russian oil depot in the Smolensk region, reportedly destroying tanks that stored petroleum products.

Agriculture

In the agricultural sector, China approved five new gene-edited crop varieties and 12 genetically modified soybean, corn, and cotton varieties to boost domestic crop production. The Chinese Agriculture Ministry granted safety certificates to a total of 17 crop varieties.

On the Chicago Mercantile Exchange, wheat prices fell 3.3%, corn dropped 0.7%, and rice declined by 0.6% last week. However, soybeans edged up by 0.2% per bushel.

The UN Food and Agriculture Organization (FAO) reported that its Food Price Index fell in December 2024 due to a decline in sugar prices. However, the index remained 6.7% higher year-on-year, despite being below the all-time high recorded in March 2022.

Sugar prices fell 5.1% in December, leading the monthly decline. Analysts noted that falling demand and strong supply weighed on prices.

Soft Commodities

Among soft commodities, cocoa and coffee posted the highest gains in 2024, up 178.2% and 69.8%, respectively, due to a global supply deficit.

Cocoa prices surged 11% last week amid supply concerns and unfavorable weather conditions in key producing regions, which raised fears of further shortages.

Sugar prices rose by 1.9%, reflecting renewed demand in major markets, while coffee prices dropped by 1.2% as supplies improved. Cotton prices saw a slight decline of 0.5% last week.

*Writing by Emir Yildirim