Prospects Of A More Dovish Fed Supporting Silver, Corn Futures Rally, Brent Crude Weighed Down By Recession Fears

Summary:

• Expectations that the Fed will change course by December sparked a bond rally.
• Worries about a possible world recession and a drop in oil consumption.
• Chicago maize futures surged to their highest levels in three months.

Silver supported by a potentially dovish fed

On optimism that the US Federal Reserve would soon cut down the rate of interest rate hikes to avoid overtightening, spot silver extended gains to beyond $19.5 per ounce, moving farther away from a 1-1/2-month low of $18.3 reached in mid-October. Investors are now essentially certain that the US central bank will announce a fourth consecutive 75 basis point rate hike on November 2, but expectations that the Fed will change course by December sparked a bond rally and caused the dollar to weaken, which increased the appeal of non-interest bearing assets. Even still, silver's price has dropped more than 25% from its March peak, when Russia's invasion of Ukraine sparked a surge in precious metals.

✕ Silver Dec ‘22 Futures Price Chart

Brent Crude weighed down by recession worries

On Monday, the price of Brent crude futures dropped below $95 per barrel as investors became uneasy over persistent worries about a possible world recession and a drop in oil consumption, particularly in China. Concerns that new coronavirus-induced restrictions may harm economic activity and reduce oil consumption were stoked by factory activity falling short of forecasts in the world's largest crude consumer. Nevertheless, despite limited worldwide supplies, the international benchmark increased by more than 10% in October, putting it on course to post its first monthly rise in five. The most significant reduction in output since the start of the crisis was reached in November by OPEC and its partners, including Russia, amid growing rumors that the oil cartel will continue to interfere in markets to support prices. As a component of broader penalties for the invasion of Ukraine, the European Union's ban on Russian oil is also scheduled to go into force in December.

✕ Brent Crude Futures Price Chart

Corn spiked after Russia pulled out on UN-mediated agreement

After Moscow abruptly backed out of the UN-mediated agreement that provided a secure trading route for grain supplies leaving Ukrainian Black Sea ports, Chicago maize futures surged to their highest levels in three months. Although the West disputed the prospect, Russia cited ships being used to deliver weaponry to Ukraine as justification for the cancellation. Following a Russian military embargo that had made seaborne grain exports from Ukraine impossible since February, an agreement that went into effect in July permitted Ukrainian grains to be transported on board ships carrying food from Ukraine. Around 20% of the world's corn exports were made through Black Sea ports prior to the invasion. In addition to prohibiting exports, the stoppage of port activities will prevent Ukraine from releasing crucial storage space in silos as the harvest for the 2022–2023 marketing year is underway, severely endangering the availability of food throughout the world.

✕ Corn Futures Price Chart

Sources: finance.yahoo.com, finance.yahoo.com