The week’s direction in commodity markets was shaped by the renewed escalation of military tensions between the United States and Iran, expectations regarding the Fed’s interest-rate policy and supply developments for individual commodities. Concerns that shipments through the Strait of Hormuz could be disrupted pushed oil prices higher, while expectations that rising energy costs could accelerate global inflation created selling pressure in bond markets.
The yield on the US 10-year Treasury note reached 4.82% during the week, its highest level since November 2023, while the yield on the 2-year note reached 4.42%, its highest since January 2025. The 10-year yield ended the week at 4.79%, up 6 basis points.
Employment data altered Fed expectations
Private-sector employment in the United States increased by 38,000 in August. The figure fell short of the market expectation of 48,000. Nonfarm payrolls, announced on the final trading day of the week, rose by 162,000, exceeding the expectation of 56,000. The unemployment rate remained unchanged at 4.1%, while total employment figures for June and July were revised upward by 55,000.
New York Fed President John Williams said inflation continued to slow because higher energy prices had not spread to service sectors. Fed Governor Christopher Waller also said he could support keeping interest rates unchanged at the September meeting if incoming data showed that inflationary pressures were easing.
Following the employment data, the probability of a Fed rate hike at its September meeting rose to as high as 65%. Although the dollar index rose on the final trading day of the week, it fell 0.5% on a weekly basis to 99.2.
China’s gold purchases reached a 21st consecutive month
Central banks added a net 23 tons of gold to their reserves in July. Officially reported net gold purchases reached approximately 130 tons in the first seven months of the year, compared with approximately 160 tons during the same period last year.
China led July purchases with 20 tons. The People’s Bank of China’s gold purchases reached a 21st consecutive month, bringing its purchases since the beginning of the year to 60 tons and its total gold reserves to 2,366 tons. Poland purchased 8 tons in July and 90 tons during the first seven months of the year, making it the period’s largest buyer. Russia sold 6 tons of gold in July, while Türkiye sold 1 ton.
Central banks’ net gold demand rose 62% year on year to 289 tons in the second quarter. Gold ended July flat at $4,027 per ounce, while global gold funds saw inflows of $3 billion.
Platinum rose 0.1% on a weekly basis. Palladium fell 1.9%, gold 0.4% and silver 0.2%.
Supply developments supported base metals
Alongside the weekly decline in the dollar index, commodity-specific supply developments also supported base-metal prices. Three-month zinc prices rose to $3,990 per ton, reaching their highest level in approximately four years. Global zinc mine production fell 2.6% in the first half of the year.
Record US refined copper imports in July and a 13% weekly decline in copper stocks on the Shanghai Futures Exchange to 63,000 tons supported copper prices. In aluminum, short-term delivery prices rising above futures prices pointed to tightness in the physical market.
In over-the-counter markets, weekly prices rose 1.7% for zinc, 0.8% for copper, and 0.3% for aluminum and nickel. Lead prices remained flat.
Strait of Hormuz effect on energy prices
The renewed escalation of tensions between the United States and Iran and concerns over shipping through the Strait of Hormuz accelerated the rise in energy prices. No lasting and large-scale disruption to oil exports from the Middle East has yet occurred, but the developments increased the geopolitical risk premium in prices.
Iraq’s oil exports rose to 2.34 million barrels per day in August from 1.35 million barrels per day. US commercial crude oil inventories fell by 4.5 million barrels to 424.5 million barrels. Gasoline inventories also declined by 1.2 million barrels. The refinery utilization rate rose to 98%, reaching its highest level since August 2018.
The benchmark natural gas price in Europe exceeded €75 per megawatt-hour, reaching its highest level since the beginning of 2023. Hot-weather forecasts and increased flows to liquefied natural gas facilities supported US natural gas prices. Brent crude rose 7.2% on a weekly basis, while natural gas prices increased 3%.
Agricultural commodity prices moved in different directions
China’s purchases from the United States and expectations of hot and dry weather in production areas affected soybean prices. The US Department of Agriculture announced that 192,000 tons of soybeans had been sold to China and 250,600 tons to unknown buyers.
Corn prices were supported by lower yield expectations in the United States and risks related to Black Sea trade. Wheat declined from the three-and-a-half-year high it reached during the week following statements on the possibility of a diplomatic solution to the Russia-Ukraine War.
Russian President Vladimir Putin said an agreement to end the war could be reached. Expectations that US negotiators would visit Moscow and Kyiv also strengthened hopes that grain shipments from the Black Sea could normalize.
Forecasts that September rainfall in India would remain below seasonal norms increased concerns over rice production. The Food and Agriculture Organization of the United Nations cut its forecast for global grain production in 2026 by 3.4 million tons to 2.98 billion tons.
Weekly prices on the Chicago Board of Trade rose 1.8% for soybeans, 0.5% for corn and 2.2% for rice. Wheat prices fell 5.6%.
Sugar rose while cocoa and cotton declined
Sugar prices were supported by a 7.9% year-on-year decline in production in Brazil’s center-south region during the first half of August and forecasts of a global supply deficit for the 2026-2027 season.
The volume of cocoa arriving at ports from Côte d’Ivoire rose 19% year on year to 2.14 million tons. Intercontinental Exchange stocks reaching their highest level in approximately two years increased selling pressure on cocoa prices.
Forecasts that Brazil’s 2026-2027 coffee crop could reach a record 77.2 million bags, along with expected rainfall in production areas, put pressure on coffee prices. In the United States, sugar rose 3% on a per-pound basis, while cotton fell 5.2% and coffee 4.7%. Cocoa prices fell 7% per ton.
