Global commodity prices recover ground in Sept 2019.

• Author: Kazmi, Shabbir

Byline: Shabbir Kazmi

Global commodity prices rose by 3.8%MoM in September, as against a drop of 5.3% in August and marking the strongest increase in five months. September rebound mostly reflected a surge in energy prices, as well as sizeable increases in prices of base and precious metals. Overall, the price of three commodity groups was positively affected by news that China and the United States would resume trade talks and US President Trump's comment that a deal could he reached sooner than expected.

On the flip side, agricultural prices declined in September for the seventh time in the last nine months. Weak prospects for the global economy continued to weigh on commodity prices, especially energy and base metals. Conversely, a somber outlook for the global economy is fanning demand for safe-haven assets such as precious metals. Against this backdrop, analysts expect global commodity prices to decline 6.6% in 4QCY19 over the same period in 2018.

Precious metals

Precious metal prices increased 2.0%MoM in September, decelerating from 5.2% rise in August, but marking the fourth consecutive monthly gain nonetheless. Precious metal prices continued to benefit from strong demand for safe-haven assets amid an uncertain global economic outlook, loose monetary policies across the globe and rising geopolitical threats. That said, recurrent news that China and the United States could reach a trade deal put some downward pressure on precious metal prices. Meanwhile, palladium prices resumed their strong upward trend in September following a short-lived drop in August. Palladium prices are underpinned by solid demand for gasoline cars and supply constraints.

Analysts forecast precious metal prices to increase by 21.8% in 4QCY19 as compared to the same period of 2018 on the back of weak global growth and heightened geological risks.

Base metals

Base metal prices rose 1.4%MoM in September, contrasting a 3.1% decrease in August. Base metal prices have fluctuated in recent weeks, mostly tracking developments in China, which consumes around half of all base metals. The restart of trade talks between the two superpowers and supply fears boosted base metal prices. Nickel prices rose at a double-digit figure for the third month in a row as Indonesia, which accounted for 22% of global nickel exports in 2018, will ban exports of nickel ore in order to develop domestic manufacturers of the commodity. Plans to shut down a major mine in the Democratic...