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Summary
Global commodity markets continue to rally as a confluence of geopolitical tensions, currency weakness and weather-related risks reshapes investor positioning. While most commodities are moving higher, cotton, corn, coffee and cocoa remain notable exceptions.
Agricultural markets are being supported by weather concerns in the Americas, shifting biofuel policies and tightening supply expectations. At the same time, macroeconomic instability, particularly around US monetary policy and a sharply weaker dollar, is driving strong inflows into precious and industrial metals.
Geopolitical Tensions Add to Market Uncertainty
Geopolitical developments remain a key driver of commodity prices. Ongoing global crises, coupled with friction between the US Federal Reserve and President Donald Trump, have unsettled financial markets. Although tensions between the US and Europe over Greenland have eased, they have not been fully resolved.
Meanwhile, Washington is pressuring Iraq to enter negotiations, raising comparisons with earlier US actions toward Venezuela. In addition, the imposition of a 30 per cent tariff on South Korea has added to global trade uncertainty, reinforcing risk-off behaviour in currency markets.
Dollar Weakness and Monetary Policy Fuel Metals Rally
The US dollar has fallen to near four-year lows, reflecting declining confidence in fiat currencies. The Federal Reserve’s decision to pause rate cuts has further eroded its credibility in the eyes of investors, as evidenced by the sharp surge in precious metals.
Gold prices have surged past $5,500 an ounce, rising 33 per cent since the beginning of the year. Silver has outperformed all commodities, jumping 68 per cent year-to-date. Within just six weeks, silver prices have doubled, while platinum group metals have gained around 30 per cent.
Over the past week alone, gold has risen more than 13 per cent and silver by 25 per cent, highlighting the intensity of the rally. Industrial metals have also benefited, with copper, zinc, nickel and aluminium up around 10 per cent. Lithium has surged over 40 per cent, while tin is up 35 per cent.
Weather and Biofuel Policies Support Agricultural Commodities
Agricultural commodities are gaining momentum on concerns over weather patterns. A mild La Niña is contributing to dry conditions across the Americas, while expectations of El Niño emerging after July are adding to uncertainty around crop prospects.
Support is also coming from expectations of higher blending mandates for palm oil and soybean oil in biofuel programs. Wheat, palm oil, sunflower oil, rapeseed and soybeans have all gained more than 5 per cent, while rice prices have jumped 15 per cent. Canola is up 10 per cent.
However, not all agri-commodities are participating in the rally. Corn has declined by 2 per cent, cocoa has plunged over 30 per cent, sugar is down 3.5 per cent, and coffee and cotton have slipped by around 0.5 per cent.
Conclusion
The broad-based rally across commodities reflects a market grappling with geopolitical instability, weakening currencies and supply-side risks. While agricultural markets are supported by weather concerns and biofuel demand, metals markets appear increasingly stretched. Analysts caution that the metals complex is entering overbought territory, suggesting that while holding existing positions may make sense, fresh investments could carry elevated risk in the near term.