While news of an impending deal between the US and Iran partially reduced the risk premium in energy markets, the fact that the deal was not yet finalized continued high volatility in oil prices.
US President Donald Trump's statements that new attacks against Iran have been halted and progress has been made in the unification process limited concerns about energy supplies. On the other hand, cautious statements from Iran this week prevented a lasting easing of tensions on the markets.
US inflation data announced during the week also had an impact on commodity prices. While the US consumer price index (CPI) rose 0.5 percent monthly and 4.2 percent annually in May, core inflation was 2.9 percent annually. The rise in energy prices suggested that inflationary pressures continued.
Energy-related burdens also came to the fore on the producer price side. While the U.S. producer price index (PPI) rose 1.1 percent monthly and 6.5 percent annually in May, the rise in the final demand energy index pushed producer prices higher.
While this data supported expectations that the Fed would not begin cutting interest rates any time soon, it put pressure on non-interest-bearing precious metals.
Analysts said the messages that Fed Chairman Kevin Warsh will give at the first meeting of the Federal Reserve's Federal Open Market Committee (FOMC), which he will chair next week, will be crucial to the direction of commodity markets, particularly precious metals.
However, analysts said potential changes in Fed communications and signaling on the rate path could increase volatility in commodity markets through the dollar index and bond yields, noting that geopolitical news flow will continue to be a determining factor for energy prices.
Due to these developments, the US 10-year bond rate fell about 5 basis points from the previous week to 4.49 percent, while the dollar index closed the week at 99.7, down 0.3 percent on a weekly basis.
A mixed trend was observed in precious metals
In precious metals, expectations that the Fed will maintain its tight monetary policy stance put pressure on gold and platinum, while silver and palladium performed positively.
Although gold found support from geopolitical risks from the Middle East, it fell due to “hawkish” pricing towards the Fed after the US inflation data.
Analysts said gold is usually supported by geopolitical risks, but this week bond rates and Fed expectations are more crucial to pricing.
Sustained outflows into gold-backed exchange-traded funds and weak physical demand were among the factors that depressed gold prices. Gold's decline below technically important averages also reinforced the short-term selling trend.
With these developments, precious metal prices rose 4.4 percent for palladium and 0.1 percent for silver on an ounce basis, while they fell 3.3 percent for platinum and 2.6 percent for gold.
China and supply concerns impacted base metal prices
Signals regarding the Chinese economy, supply and energy cost concerns from the Middle East, and product-based supply-demand developments were also at work in base metals.
Although copper prices were supported by China's imports of unprocessed copper and copper products, which fell 1.3 percent monthly in May, supply-side concerns and uncertainties over U.S. trade policy did not deter selling.
In the over-the-counter base metals market, pound prices rose 3.5 percent for copper and 1.3 percent for zinc this week, while nickel fell 4 percent, lead fell 1.9 percent and aluminum fell 1.2 percent.
Risk premium for Brent oil fell
Supply risks from the Middle East and the news situation regarding the negotiations between the USA and Iran had a positive effect on oil prices.
Although concerns about energy supplies through the Strait of Hormuz supported oil prices throughout the week, news of an impending deal between the US and Iran caused the risk premium to decline in the final days of the week.
US President Donald Trump's comments that new attacks against Iran had stopped and news that progress had been made on the text of the deal led to a fall in Brent oil prices.
On the other hand, the Iranian side's cautious approach to claims that the agreement was concluded prevented the elimination of uncertainties regarding energy supplies.
During the same period, refinery utilization increased to 95.3 percent, indicating that U.S. refining activity remained strong.
Markets also focused on the OPEC+ group's decision to increase its production targets for July by 188,000 barrels per day.
However, on a weekly basis, the barrel price of Brent oil fell by 6.5 percent and the price of natural gas in British Thermal Units (MMBtu) fell by 3.4 percent.
When it comes to agricultural raw materials, production forecasts and supply concerns came to the fore
During the week, agricultural commodities were impacted by production forecasts from the US Department of Agriculture, weak purchases of US agricultural products by China and cost pressure from the Middle East.
The U.S. Department of Agriculture has revised down its U.S. winter wheat production forecast due to the drought. Drought in the lowland region put pressure on hard red winter wheat production and increased supply concerns in the wheat market.
The fact that US production forecasts for corn and soybeans did not change significantly and continued strong production expectations in South America limited price increases.
China's purchases of U.S. agricultural products were among the headlines in grain and oilseed markets.
With these developments, prices per bushel on the Chicago Mercantile Exchange rose 5.6 percent for corn, 1 percent for soybeans and 0.9 percent for wheat, while they fell 2.9 percent for rice.
Developments in the supply and marketing policies of cocoa from West Africa affected pricing. Ivory Coast's cautious approach to sales and production risks in the new season due to El Niño supported cocoa prices.
In the United States, pound prices on the Intercontinental Exchange rose 3.3 percent for cocoa, 3 percent for coffee and 0.7 percent for sugar, while cotton fell 1.3 percent.
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