"A Song of Ice and Fire" Plays Out in Commodity Futures: Crude Oil Surges Ignite Chemicals, Precious Metals Plunge in Cold Spell

Why is the Federal Reserve policy game suppressing precious metals’ trends?

The ongoing turmoil in the Middle East is causing intense structural shocks in the global commodity markets through the Strait of Hormuz, a critical energy “throat.”

Strong US dollar returns, precious metals face “counterintuitive” trends

If the rise in the commodities sector reflects direct transmission of geopolitical risks, then the decline in precious metals reveals a profound shift in the market’s main trading themes.

Gu Fenga, Chief Analyst at Guoxin Futures, pointed out that the current trading focus in the precious metals market has shifted from “geopolitical safe-haven” to “inflation expectations and monetary policy battles.” Although the escalation of Middle East conflicts has increased safe-haven demand, soaring oil prices have also sparked strong concerns about further inflation. The transmission chain of “geopolitical conflict—oil prices—inflation” reinforces market expectations that the Fed will maintain high interest rates or delay rate cuts, strengthening the US dollar index and putting downward pressure on gold prices. Silver follows the macro logic of gold but, due to its stronger commodity nature and price elasticity, exhibits more volatile swings.

Jiang Wenbin, Head of the Macroeconomic Group at Minmetals Futures, analyzed that the surge in oil prices boosts inflation expectations and prompts the market to reassess the US economy’s resilience to energy shocks. Current energy price increases intensify inflationary pressures, causing the Fed to adopt a cautious pace of rate cuts. In the short term, rapid easing signals are unlikely, which will temporarily suppress precious metal prices.

Platinum and palladium lead declines, macro pressure resonates with fundamentals

Within the precious metals sector, platinum-group metals have experienced particularly sharp declines. Fundamentally, the platinum market lacks clear unilateral driving forces. On the demand side, although global auto sales have rebounded somewhat, they remain in a slow recovery phase, making it difficult to generate strong short-term demand support. On the capital side, global platinum ETF holdings have decreased week-over-week, reflecting cautious investor sentiment amid current macro headwinds. Palladium prices have fallen mainly due to eased spot shortages and rising long-term supply-demand expectations.

Before the Fed’s rate decision, rate cut expectations have shifted significantly

This week, the Fed will hold the March FOMC meeting. Under the shadow of stagflation—high inflation and low growth—market expectations for monetary policy have undergone a fundamental reversal.

Market divergence may intensify, traders should beware of two-way volatility

Looking ahead, many institutions believe that under the dual influence of geopolitical tensions and monetary policy battles, the structural divergence in commodity markets may further deepen.

For traders, the current market requires vigilance against the risk of sharp pullbacks after geopolitical tensions ease, as well as attention to potential short-term liquidity tightness amid high volatility. Until the Fed’s rate cut path becomes clearer, extreme polarization between “ice” and “fire” may become the norm in commodity markets.

Risk warning: Any information or opinions provided in this article are for reference only and do not constitute investment advice. Investors should not make buy or sell decisions based solely on this information, and do so at their own risk.