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Commodity market insights amidst Nvidia mania and geopolitical tensions

Amidst the frenzy surrounding Nvidia’s meteoric rise, questions arise about its impact on commodity markets. Investor attention diverted from metals and softs, leaving them vulnerable to various economic factors, including American inflation data, weak sentiment, US bond yields, and the trajectory of the US dollar.

Geopolitical tensions exacerbate market uncertainty, with concerns over Ukraine, Russia, Gaza, and the Red Sea. Additionally, speculation mounts regarding China’s economic stimulus efforts and its potential effects on global markets.

This week, significant data releases promise to sway markets further. The focus lies on US PCE inflation and spending data, alongside economic growth and inflation reports from Japan, the eurozone, and Australia.

Worries over Chinese energy demand intensify following a surprise cut in key rates influencing mortgage costs. Further unease stems from a steep decline in new house prices in January, with implications for GDP reports and forthcoming inflation and spending data.

US bond yields closed marginally weaker, while the dollar saw modest easing. Despite a year-to-date increase, the US 10-year bond yield ended at 4.25%, down slightly from the previous week.

Comex gold futures experienced gains, with the April contract up $25.30 for the week. Copper also rose, closing at $3.87 per pound on Comex.

Singapore iron ore futures nearly rebounded to $120 per tonne, albeit still down significantly from previous weeks.

Oil prices remain volatile, driven by concerns over demand. Brent and US West Texas Intermediate prices saw declines amid worries about Chinese energy demand and geopolitical tensions.

RBC Capital Markets notes soft domestic oil demand in China, compounded by underwhelming government stimulus measures. US oil stocks continue to rise, although the pace has slowed in recent weeks.

US crude oil production remains at a record high of 13.3 million barrels per day. Despite this, energy firms have increased oil rigs for the second time in three weeks.

While the US oil and gas rig count has risen, it remains lower than a year ago. US oil futures show a 7% increase in 2024, contrasting with a decline in gas futures of over 35%.

In summary, the Nvidia frenzy and geopolitical uncertainties continue to sway commodity markets, with investor sentiment closely tied to economic data releases and geopolitical developments.