To The Moon

Commodities, often seen as the global economy’s “barometer,” profoundly affect industrial production, trade flows, and investment decisions through their price fluctuations. Since the start of 2025, commodity markets have displayed notable divergence, influenced by shifting global liquidity conditions, changes in supply-demand dynamics, and escalating geopolitical tensions.

Recently, gold prices experienced a dramatic reversal. Since mid to late August, driven by the Federal Reserve’s rate cuts, geopolitical disruptions, and sustained central bank gold purchases worldwide, international gold prices briefly surged above $4,000 per ounce. However, as trade tensions eased and profit-taking intensified among investors, gold prices faced downward pressure.

Simultaneously, ongoing international trade talks continue to reshape the cross-border flow patterns of major commodities like soybeans and crude oil. Industry insiders suggest that tariff adjustments will directly impact import volumes and price transmission efficiency, thus disrupting markets.

The Rate Cut is in, but Powell Cools Expectations

At 2:00 a.m. Beijing time on Thursday, the Federal Reserve delivered the expected rate cut, lowering the federal funds target rate by 25 basis points to a range of 3.75% to 4.00%. This marks the Fed’s second consecutive 25-basis-point cut and the fifth since September of last year.

Additionally, the Fed announced it will end the balance sheet runoff program on December 1. The principal from redeemed mortgage-backed securities will be reinvested in short-term Treasury bills, and extensions will be applied to all maturing U.S. Treasury principal payments.

Notably, signs of growing internal dissent emerged during the monetary policy meeting. Two members dissented from the decision: Kansas City Fed President Esther George opposed the rate cut, favoring holding rates steady, while Governor Christopher Waller argued for a 50 basis-point cut.

In the post-meeting press conference, Federal Reserve Chair Jerome Powell’s hawkish tone dampened market sentiment, adding uncertainty to the future path of monetary policy. Powell stated that the decision for December rate moves remains uncertain, emphasizing that a rate cut next month is “far from a done deal.”

Following Powell’s comments, markets reacted with volatility. U.S. stocks dipped intraday, finishing with the Dow Jones down 0.16%, the S&P 500 marginally lower by less than 0.01%, and the Nasdaq rising 0.55%. This volatility spilled over to commodity markets; as a traditional safe-haven asset, gold weakened with COMEX December gold futures on the New York Mercantile Exchange dropping over 0.5%, slipping beneath $3,960 per ounce.

GTC ZeHui Capital noted that the Federal Reserve’s policy direction remains the key determinant of medium-term precious metals trends, while short-term price swings are increasingly driven by market sentiment.

Regarding gold price forecasts, analysts at Citibank warned that gold could fall back to around $3,800 within the next three months. Bloomberg’s commodity strategy analysts echoed this view, projecting a possible 20% to 30% correction in gold prices, especially given historical patterns following substantial rallies.

Easing Trade Tensions and Commodity Outlook

Following the Fed’s October rate decision, market attention has shifted to the Asia-Pacific Economic Cooperation (APEC) meeting in South Korea, particularly the Sino-U.S. trade talks scheduled for October 30.

Ray Sharma-Ong, Vice Head of Multi-Asset Client Solutions at Aberdeen Standard Investments, anticipates the China-U.S. trade negotiations will influence market sentiment heading into November 2025. Key issues on the agenda include chip export controls, rare earth supply, tariff structures, fentanyl-related policies, and trade in critical commodities like soybeans.

Prior to this, Sino-U.S. trade relations had deteriorated several times, heightening tension. For example, since the mid-September Madrid economic and trade talks, the U.S. has implemented new restrictions on Chinese entities by placing multiple companies on export control and special designated nationals lists. In early October, the U.S. also announced export controls on rare earth materials to China, proposed a 100% tariff on related goods, and imposed software export controls, though it later withdrew consideration of the full tariff increase.

Against a backdrop of fluctuating Trump-era trade policies and pending trade agreements between the U.S. and other countries, the question remains: where are commodity prices headed?

From agricultural goods like soybeans and corn to industrial raw materials such as copper and crude oil, commodity markets promptly react to trade policy changes. To manage risk amid price volatility, investors are advised to consider instruments such as CME Group’s Micro WTI Crude Oil futures and U.S. soybean futures.

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