Commodities are expected to rise as expectations of a Fed rate cut grow

Federal Reserve Chairman Powell's speech at the Jackson Hole Economic Symposium sparked a strong reaction in global financial markets. He made it clear that the Federal Open Market Committee (FOMC) is very likely to announce a cut in the federal funds rate at its meeting on September 17. This signal pushed the market's expected probability of a rate cut from 76% to 89.2%.

From the perspective of the transmission logic of the Federal Reserve's interest rate path to commodity prices, different commodities, due to their unique properties, react significantly differently to interest rate changes. Against the backdrop of growing expectations of a Fed rate cut, prices of commodities sensitive to Fed policy, such as copper, silver, and gold, are expected to rise.

Pu Zulin, chief macro analyst at Zhengxin Futures, stated that due to disruptions from factors like trade conflicts, upstream mining companies in the commodity market have long-term capital expenditure shortfalls. Meanwhile, the US economy maintains strong growth, driven by demographic, technological, and fiscal expansion cycles, and prices remain high. Against this backdrop, if the Federal Reserve adopts loose monetary policy, it is likely to fuel economic overheating, thereby stimulating demand for commodities in the US and globally. Given the supply constraints on commodities and the current low inventory and prices, this round of Fed rate cuts is expected to be positive for commodities in the medium term.