Global Liquidity Boost and Supply Bottlenecks Spark Multi-Commodity Rally

A surprise liquidity intervention by the US Treasury and escalating geopolitical supply anxieties have triggered a broad-based rally across global commodity markets. Benefiting from a weakening US dollar and tight supply chains, precious metals and agricultural commodities have reclaimed their upward momentum, revitalizing investor appetite.

Treasury Buybacks and the Fed Tightrope: Dollar Retreats

US Treasury's decision to double its maximum buyback amount per transaction from $2 billion to at least $4 billion temporarily cooled long-term yields, pulling the 10-year yield to 4.74% and the 30-year yield to 5.28%. The Dollar Index (DXY) fell 0.8% to 98.8, paving the way for dollar-denominated assets. Meanwhile, the Fed's July 28-29 minutes revealed that policymakers remain open to further tightening.

On the other hand, Goldman Sachs analysts pointed out that the demand for gold options as a hedge against macroeconomic policies has surged. The Fed's rate pause and weaker economic data revitalized speculative interest and exchange-traded fund inflows.

Precious metals weekly performance:

■Platinum: 7.5% increase

■Silver: 6.7% increase

■Gold: 5.2% increase

■Palladium: 2.6% increase

China’s Sluggish Locomotive and the Base Metals Tug-of-War

Soft economic indicators from China—specifically July industrial production and retail sales—kept demand concerns alive for base metals. The continued slump in real estate investments limited the upside potential, though individual supply dynamics caused divergence among metals.

Copper prices fell due to rising LME inventories, while aluminum found an equilibrium between Gulf supply disruptions and China's high export volume. Citi analysts noted that flat domestic demand in China has strengthened its semi-finished export capabilities.

Base metals weekly performance on the OTC market:

■Zinc: 1.8% increase

■Nickel: 1.6% increase

■Lead: 0.3% increase

■Copper: 0.3% decrease

■Aluminum: Flat performance

Hormuz Bottlenecks and El Niño: Energy and Agriculture Surge

Geopolitical tensions and low shipping traffic in the Strait of Hormuz kept energy risk premiums high. With nearly one-fifth of global oil consumption passing through this route, Brent crude rose 5.9% and natural gas gained 4.5%, supported by high US cooling demand.

In agriculture, the strengthening El Niño weather pattern threatened crop yields in Asia and South America. The US Department of Agriculture lowered its corn yield forecast by 2.3 bushels per acre, while India's announcement to import 1 million tons of raw sugar duty-free pushed agricultural prices significantly higher.

Agricultural commodities weekly performance:

■Sugar: 6% increase

■Corn: 5.2% increase

■Rice: 5.1% increase

■Cotton: 4.1% increase

■Soybeans: 4% increase

■Cocoa: 3.6% increase

■Coffee: 3.4% increase

This temporary relief in global liquidity, coupled with rising commodity prices, will keep inflationary pressures alive in emerging markets, particularly for raw material importers. As central banks maintain their tight monetary stance, the contraction in commercial loan growth will persist, driving up funding costs for the banking sector. While SMEs' working capital requirements multiply under this commodity shock, macroprudential measures restricting credit access could further squeeze the real sector. Given these elevated borrowing costs, a selective tightening in commercial loan volumes remains inevitable.