Gold Prices Dip In the Wake Of Hawkish Fed Comments, Cotton Futures Trading Near 2-month Highs, Brent Crude Supplies Are Expected To Tighten

Chile's Lithium Nationalization and the Global Trend of Resource Nationalism: Implications for EV Supply Chains and Efforts to Strengthen Battery Metal Supply

Summary:

  • US economy shrank in the second quarter at a moderate rate.
  • Reduced global cotton supplies.
  • Brent crude futures rose.

Gold prices dip

In anticipation of US Federal Reserve Chair Jerome Powell's speech at the Jackson Hole symposium later in the day, gold prices dipped below $1,760 an ounce on Friday. Following a slew of hawkish comments from Fed officials, Powell is expected to reiterate the central bank's aggressive stance against rising inflation. However, the markets are still split on whether the Fed will deliver another supersized 75 basis point or a more modest half-percentage point rate hike in September. A final estimate revealed that the US economy shrank in the second quarter at a more modest rate, bolstering the case for additional monetary tightening and maintaining pressure on the bullion markets. Although analysts predict further volatility should Powell's words surprise markets, gold is expected to close the week with minimal change.

Gold Prices Dip In the Wake Of Hawkish Fed Comments, Cotton Futures Trading Near 2-month Highs, Brent Crude Supplies Are Expected To Tighten - 1 Gold Dec ‘22 Futures Price Chart

Cotton futures trade near 2-month highs

Trading in cotton futures was relatively close to the nearly two-month high reached on August 16 as traders weighed the likelihood of reduced global supplies against a slowing in demand. The most recent USDA data stated that due to drought, particularly in Texas, which generally accounts for more than half of the US plantings, US production for 2022–2023 is predicted to drop to 12.6 million bales, which would be the lowest level since 2009–2010. The USDA also decreased its forecasts for global cotton consumption and production by 800,000 bales and 3.1 million bales, respectively. Heavy rains and bugs have severely damaged the cotton fields in India, another top producer, to the point where the government is now importing cotton. The projection of production this year has come down to 31.5 million bales while consumption is 34.5 million bales.

Gold Prices Dip In the Wake Of Hawkish Fed Comments, Cotton Futures Trading Near 2-month Highs, Brent Crude Supplies Are Expected To Tighten - 2 Cotton Oct ‘22 Futures Price Chart

Brent Crude supply tightening

With a tightening supply forecast and hints of improving short-term fuel demand, Brent crude futures increased to almost $100 per barrel on Friday and were expected to end the week more than 3% higher. Official US data released on Wednesday revealed record crude and refined product exports last week along with a sustained fall in crude stocks. Additionally, traffic levels in the Asia Pacific, Europe, and North America increased significantly in the week leading up to August 24 according to TomTom's Congestion Index data. On the supply front, Saudi Arabia issued a warning that OPEC+ would reduce output to calm choppy markets. However, some OPEC sources told Reuters that such a move may not be imminent and that it would take place at the same time as Iranian oil returning to the international market. Brent prices, however, fell 1.9% on Thursday as negotiations to resurrect the 2015 nuclear deal between Iran and the West appeared to be moving forward.

Gold Prices Dip In the Wake Of Hawkish Fed Comments, Cotton Futures Trading Near 2-month Highs, Brent Crude Supplies Are Expected To Tighten - 3 Brent Crude Futures Price Chart

Sources: finance.yahoo.com, tradingeconomics.com

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Rebecca Duthie

Remote Editor and writer Intern
FXMAG.COM

Rebecca has a bachelors degree in Investment Management, a Post Graduate Diploma in Financial Planning and is currently enrolled in a Masters program in International Management with a Specialization in International Finance.