A number of commodities were sent plummeting on Thursday, as Chinese regulators intervened in what were surging prices, while the US dollar gained momentum.
The decline in commodities was broad-based, as palladium and platinum futures dropped by over 11% and 7%, respectively, while copper contracts and corn futures were also sent downward. Oil prices, too, fell by over 2% on Thursday.
The latest decline in commodities initially began earlier in the week, when Chinese regulators announced that they would release metal reserves, including aluminum and copper, following a rise in speculation across financial markets. “Base metals prices are melting as China’s State Council escalates its crackdown against commodity speculators and hoarders by investigating [state-owned enterprises]′ overseas positions and auditing futures firms to combat squeezed profit margins,” explained TD Securities commodities strategist Daniel Ghali in a note seen by CNBC.
In addition, the Federal Reserve’s latest inflation and interest rate projections created widespread ripple effects across markets, putting upward pressure on the greenback. The dollar index, which measures the US dollar relative to a basket of various other currencies, is up by approximately 1.6% since the Fed released its latest economic projections.
“The US dollar is probably reacting to bond yields moving higher yesterday and the prospect of an earlier tapering which would slow the supply of US dollars and this has led to a sizable decline in commodity prices across the board,” Jim Paulsen from Leuthold Group told CNBC. “Commodities have been a popular investment in the last year as investors have been adding some portfolio protection against inflation.”
Information for this briefing was found via CNBC. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
