Even commodity futures contracts are not immune to inflationary fears that are pressing on global markets. Oil fell by 7%, coffee had the biggest loss in the last two months, while corn and copper fell.
Fresh concerns that the Federal Reserve will let inflation accelerate have sparked a sale in most risky assets on Thursday. US equities fell from records, and Treasury yields rose. These movements have spilled over into commodities, with physical demand strongly linked to global growth expectations.
However, it was a bit of a paradox for the goods. Markets can sometimes benefit from an inflationary environment, as investors consider commodities a good place to find Yield. But the inflation equation needs to be correct: too much, especially if it is associated with worries about growth and a higher dollar, and rising inflation is quickly turning into a pull against the expectations of deflated demand.
The goods had a overloaded the beginning of the year, which recorded an increase in crude by more than 30% until Wednesday. Corn, soybeans and copper have arrived many-year highs and timber prices rose. Bulls took such an order that some traders were preparing for a new supercycle of extended earnings.
Is the reason for goods continuing to grow? I’m a yield house
This excitement has stopped this week as slow vaccine launches have raised concerns about how long it will be before energy, metals and cereals consumption return to pre-pandemic levels. This has been exacerbated by gains in the dollar, which make dollar-priced commodities less attractive as a value deposit.
“Treasury yields and the dollar are accountable to the Fed, and this is currently having a negative impact on commodities,” Arlan Suderman, chief economist of commodities at StoneX, said in an email.
The Bloomberg Commodity Spot Index fell 2.4%, the biggest drop since mid-September.
West Texas Intermediate’s gross futures fell for the fifth session, the longest daily loss in more than a year. Global oil demand will not return to pre-pandemic levels until 2023, and growth will be reduced later amid new work habits and a shift from fossil fuels, the International Energy Agency said this week.
And grain prices have fallen. There are signs of improved growing conditions for some crop producers. Beneficial rains for soybeans in Argentina weighed on the market, while favorable weather in the US, Russia and Ukraine pressed down on wheat prices.
Meanwhile, gains on Treasury yields affect the demand for non-interest-bearing alternative assets such as gold and silver.