Inflation is forcing interest rate hikes, leading to a completely divergent market trend in commodities.
2026-09-02 19:08:03
Entering September 2026, global capital markets face multiple pressures: commodity prices are generally rising, inflation remains stubbornly high, market expectations for interest rate hikes continue to intensify, and government debt in various countries is under pressure and its sustainability is questionable, making the overall market environment increasingly severe. Commodities are at the core of all current market contradictions. The continuous rise in energy and agricultural product prices is constantly pushing up inflation, while major central banks around the world have clearly signaled that future market borrowing costs are likely to remain high, and may even continue to rise, completely disrupting the overall market balance. 
The current shift in the market landscape began with Federal Reserve Chairman Kevin Warsh's speech at the Jackson Hole Economic Symposium last Friday. In his speech, he emphasized the need to stabilize prices and suppress inflation, a strong stance that led to a complete rebalancing of market expectations. Many anticipated further tightening of monetary policy in the US, directly driving up US bond yields and causing a significant appreciation of the US dollar, triggering a chain reaction of volatility in global markets. This market turmoil has long since transcended the adjustment of Fed policy expectations, spreading to global financial markets. The yield on 10-year US Treasury bonds climbed to 4.79%, reaching its highest level since January 2025, triggering a large-scale sell-off in the bond market. Simultaneously, European and Asian markets also came under pressure. The yield on 10-year German government bonds broke through 3.35%, a 15-year high; the yield on 10-year Japanese government bonds broke through 3%, the first time in over 30 years. The global bond market as a whole has entered a phase of high volatility, high returns, and high risk. From a structural perspective, the rise in short-term bond yields is mainly due to market expectations of continued monetary policy tightening; while the reasons for the rise in long-term bond yields are more complex. Investors are now actively demanding higher returns to hedge against the uncertainty of inflationary fluctuations, the funding pressures from massive government debt issuance, and the increasingly prominent fiscal risks. The total US government debt has now exceeded $40 trillion, and the continuously rising market borrowing costs are profoundly changing macroeconomic trends, becoming a key variable affecting the global economy. Core commodities driving inflation continue to rise in price. Despite the continued tightening of global financial conditions, the prices of core commodities that directly impact people's livelihoods and drive up inflation have not fallen; instead, they have continued to rise. Since the Jackson Hole meeting, the Bloomberg Commodity Total Return Index has steadily increased, with energy, grains, and soft commodities being the main drivers of the rise, while precious metals, as safe-haven assets, have continued to fall. Simply put, the prices of goods that are currently driving up inflation and raising the cost of living and production are rising, while the prices of safe-haven commodities used to hedge against inflation and mitigate risk are falling, showing a clear misalignment in market trends. Energy commodities are the most direct source of current inflationary pressure. Recent escalation of geopolitical tensions between the US and Iran has fueled widespread market concerns about prolonged disruptions to oil shipping routes through the Strait of Hormuz, leading to supply shortages and a two-day rise in international crude oil prices. Brent crude has now regained its footing above $92 per barrel, exacerbating the already tight supply situation in the refined oil market and intensifying supply risks and price pressures. The pressure on energy prices in Europe is particularly pronounced. European diesel futures, the benchmark for diesel and jet fuel pricing, have broken through $183 per barrel; natural gas prices have surged to €71.5 per megawatt-hour, equivalent to approximately US$24.3 per million British thermal units (MMBtu), more than eight times the price of natural gas in the United States. These persistently high European energy prices directly highlight Europe's heavy reliance on imported energy. Geopolitical conflicts and supply chain disruptions can immediately impact local energy supply and price levels, making it vulnerable to risk. The price increases in diesel and natural gas affect almost the entire industry chain. Diesel price increases not only raise costs for private cars and logistics transportation, but also directly increase the overall costs of freight transport, agricultural planting, mining, construction, and industrial manufacturing. High-priced natural gas will raise production costs for electricity generation and various manufacturing industries. These price increases are rigid inflation caused by supply shortages and geopolitical conflicts, and cannot be directly resolved by central bank interest rate hikes or tightening monetary policy. Monetary policy can only suppress market consumption and investment demand, but cannot increase the supply of oil, natural gas, and refining capacity. This is the core reason why current inflation is difficult to cool down quickly. Continued price increases in agricultural products create a second layer of inflationary pressure . Besides energy, grain and agricultural products have become the second largest core force driving up inflation. The Bloomberg Agriculture Commodity Total Return Index reached its highest point in 14 years at the end of August, with a 12.4% increase throughout August. The sharp rise in sugar, wheat, and corn prices boosted the entire grain and soft commodities sector, completely offsetting the slight decline in livestock product prices. The overall upward trend in the agricultural market is very clear. The current surge in agricultural product prices stems primarily from two real-world problems: first, extreme weather events in many parts of the world have severely disrupted crop planting and harvesting, resulting in lower-than-expected grain production; second, the escalating conflict between Russia and Ukraine has damaged key agricultural export facilities and disrupted transportation around the Black Sea. The Black Sea region accounts for more than a quarter of global wheat exports, and supply chain disruptions have directly triggered concerns about global food supply, driving wheat prices up to near their highest level in three years. Unlike the rapid transmission of energy price increases, the impact of agricultural product price increases is delayed. Energy price increases are almost immediately reflected in oil, electricity, and commodity prices, but price increases in grains such as wheat and corn require multiple stages, including processing, storage, transportation, and retail, before ultimately affecting final food prices. This means that even if energy prices gradually stabilize and decline, food inflation will persist for a considerable period, and inflationary stickiness will significantly increase. The dual pressure of rising energy and agricultural product prices has put global central banks in a dilemma: current inflation is not caused by overheated economies or excessive demand, but rather by structural inflation resulting from supply shortages and geopolitical conflicts. If central banks continue to tighten monetary policy and raise interest rates, it will not only fail to solve the commodity supply problem, but will also suppress the development of the real economy, further increasing the fiscal pressure on governments and escalating economic pressure. Precious metals are under pressure and falling, with both short-term negative factors and long-term support coexisting. In this round of monetary policy expectation adjustments, precious metals such as gold and silver have been most directly and significantly impacted. Since Warsh's hawkish speech, gold and silver prices have fallen by more than 4% in just a few days, mainly due to three real negative factors: the market's expectation of a short-term interest rate hike continues to rise, the real and nominal interest rates of various bonds are rising simultaneously, and the US dollar exchange rate continues to strengthen. The US dollar has maintained a strong trend since the Jackson Hole meeting. After precious metal prices broke through key technical support levels, many trend traders sold their positions and closed out their holdings, further accelerating the decline in gold and silver prices. From an investment perspective, rising bond yields mean a higher opportunity cost of holding non-interest-bearing safe-haven assets like gold and silver, making investors more inclined to choose bonds with interest income. A stronger dollar also significantly increases the cost for non-US investors to buy precious metals, directly suppressing market demand. However, from a long-term investment perspective, the decline in precious metal prices is merely a short-term fluctuation, and the long-term support logic remains intact. If central bank interest rate hikes are intended to effectively curb inflation, they will indeed put downward pressure on gold prices. However, the current rise in long-term bond yields is more due to market concerns about excessive national debt, massive government bond issuance, and pressure on fiscal credit. In this context, the safe-haven value of precious metals will gradually become more prominent. As government debt interest payments continue to increase and debt repayment pressure continues to rise, policymakers are likely to intervene to prevent unlimited increases in long-term market interest rates. This keeps gold in a constant state of tug-of-war between bulls and bears: in the short term, it faces downward pressure from high interest rates and a strong dollar, while in the long term, it can be supported by global debt concerns and currency devaluation risks. In addition, the continued gold purchases and optimization of foreign exchange reserve structures by central banks around the world have provided stable long-term support for gold prices. This kind of essential demand will not easily change due to short-term fluctuations in US interest rates. Industrial metals bucked the trend and strengthened, with supply and demand fundamentals dominating the market. Unlike the weak performance of precious metals, industrial metals were largely unaffected by the strengthening dollar and rising interest rates, exhibiting an independent upward trend. From a conventional market perspective, a stronger dollar and higher financing costs would increase the operating pressure on industrial enterprises, suppress industrial demand, and negatively impact industrial metal prices. However, the current extremely tight physical supply situation completely offset the impact of macroeconomic negative factors. Zinc prices are a typical example of this round of industrial metal price increases. Zinc prices on the London Metal Exchange steadily climbed to around $4,000 per ton, reaching a four-year high since May 2022. The core supporting factors are very clear: a continuous decline in global refined zinc inventories outside of China, raw material supply shortages, and tight spot market positions—multiple positive factors jointly propelled the continued strength of zinc prices. Copper prices have also remained strong, having previously broken historical highs, with London copper prices currently holding steady above $14,000 per ton. The current spot supply of copper is extremely tight, with a large amount of copper resources flowing into the US market, further tightening global spot circulation. Both copper and zinc markets are seeing spot prices higher than futures prices, the most direct signal of a tight physical supply, which continues to support the prices of both metals. The latest production data from Chile, the world's largest copper producer, also confirms the current shortage of industrial metals. Affected by severe storms and extreme weather in mining areas, Chilean mining operations were largely restricted, and the country's copper production in July fell by 9.4% year-on-year, further exacerbating the global supply shortage. The significant divergence between the price movements of precious metals and industrial metals demonstrates that this round of broad-based commodity price increases is not simply a financial rally driven by monetary easing and ample market funds, but rather a structural market driven by a genuine supply-demand gap in physical commodities. As long as the spot supply of commodities remains tight, the support from fundamentals will far outweigh the negative pressure from macroeconomic factors such as interest rates and exchange rates. Macroeconomic policies are caught in a dilemma, and the market's divergence continues. The market's performance in the coming weeks will determine which side, bulls or bears, will dominate. If prices of core commodities such as crude oil, refined oil, and grains continue to rise, market inflation expectations will remain high, and expectations for interest rate hikes by the Federal Reserve and other central banks will further intensify. In the short term, this will continue to suppress gold and silver prices, while also dampening overall market risk appetite and suppressing overall demand for various commodities. At the same time, rising market policy interest rates and long-term bond yields will significantly increase financing costs for countries worldwide. Currently, government debt levels in various countries are at historically high levels, and persistently high interest rates will continue to increase fiscal debt repayment pressure, making the market more focused on global debt sustainability, currency devaluation risks, and potential future market control policies from various countries. The core contradiction in the current commodity market is very clear: it is caught between high interest rates and high inflation, but the performance of different categories is completely divergent, exhibiting stark contrasts. Energy and agricultural products continue to rise in price due to supply shortages and geopolitical conflicts; industrial metals maintain their strength thanks to a tight spot supply and demand situation; while gold and silver are temporarily constrained by monetary tightening and a stronger dollar, facing short-term downward pressure. A clear paradox exists in the market: rising commodity prices are forcing market interest rates to remain high in the long term, while high interest rates will continue to exacerbate the fiscal pressure and debt risks of highly indebted countries. In the long run, this will reignite market concerns about currency devaluation and debt crises, and these factors are precisely the core logic supporting the long-term investment value of precious metals and driving long-term gold price increases.
The current shift in the market landscape began with Federal Reserve Chairman Kevin Warsh's speech at the Jackson Hole Economic Symposium last Friday. In his speech, he emphasized the need to stabilize prices and suppress inflation, a strong stance that led to a complete rebalancing of market expectations. Many anticipated further tightening of monetary policy in the US, directly driving up US bond yields and causing a significant appreciation of the US dollar, triggering a chain reaction of volatility in global markets. This market turmoil has long since transcended the adjustment of Fed policy expectations, spreading to global financial markets. The yield on 10-year US Treasury bonds climbed to 4.79%, reaching its highest level since January 2025, triggering a large-scale sell-off in the bond market. Simultaneously, European and Asian markets also came under pressure. The yield on 10-year German government bonds broke through 3.35%, a 15-year high; the yield on 10-year Japanese government bonds broke through 3%, the first time in over 30 years. The global bond market as a whole has entered a phase of high volatility, high returns, and high risk. From a structural perspective, the rise in short-term bond yields is mainly due to market expectations of continued monetary policy tightening; while the reasons for the rise in long-term bond yields are more complex. Investors are now actively demanding higher returns to hedge against the uncertainty of inflationary fluctuations, the funding pressures from massive government debt issuance, and the increasingly prominent fiscal risks. The total US government debt has now exceeded $40 trillion, and the continuously rising market borrowing costs are profoundly changing macroeconomic trends, becoming a key variable affecting the global economy. Core commodities driving inflation continue to rise in price. Despite the continued tightening of global financial conditions, the prices of core commodities that directly impact people's livelihoods and drive up inflation have not fallen; instead, they have continued to rise. Since the Jackson Hole meeting, the Bloomberg Commodity Total Return Index has steadily increased, with energy, grains, and soft commodities being the main drivers of the rise, while precious metals, as safe-haven assets, have continued to fall. Simply put, the prices of goods that are currently driving up inflation and raising the cost of living and production are rising, while the prices of safe-haven commodities used to hedge against inflation and mitigate risk are falling, showing a clear misalignment in market trends. Energy commodities are the most direct source of current inflationary pressure. Recent escalation of geopolitical tensions between the US and Iran has fueled widespread market concerns about prolonged disruptions to oil shipping routes through the Strait of Hormuz, leading to supply shortages and a two-day rise in international crude oil prices. Brent crude has now regained its footing above $92 per barrel, exacerbating the already tight supply situation in the refined oil market and intensifying supply risks and price pressures. The pressure on energy prices in Europe is particularly pronounced. European diesel futures, the benchmark for diesel and jet fuel pricing, have broken through $183 per barrel; natural gas prices have surged to €71.5 per megawatt-hour, equivalent to approximately US$24.3 per million British thermal units (MMBtu), more than eight times the price of natural gas in the United States. These persistently high European energy prices directly highlight Europe's heavy reliance on imported energy. Geopolitical conflicts and supply chain disruptions can immediately impact local energy supply and price levels, making it vulnerable to risk. The price increases in diesel and natural gas affect almost the entire industry chain. Diesel price increases not only raise costs for private cars and logistics transportation, but also directly increase the overall costs of freight transport, agricultural planting, mining, construction, and industrial manufacturing. High-priced natural gas will raise production costs for electricity generation and various manufacturing industries. These price increases are rigid inflation caused by supply shortages and geopolitical conflicts, and cannot be directly resolved by central bank interest rate hikes or tightening monetary policy. Monetary policy can only suppress market consumption and investment demand, but cannot increase the supply of oil, natural gas, and refining capacity. This is the core reason why current inflation is difficult to cool down quickly. Continued price increases in agricultural products create a second layer of inflationary pressure . Besides energy, grain and agricultural products have become the second largest core force driving up inflation. The Bloomberg Agriculture Commodity Total Return Index reached its highest point in 14 years at the end of August, with a 12.4% increase throughout August. The sharp rise in sugar, wheat, and corn prices boosted the entire grain and soft commodities sector, completely offsetting the slight decline in livestock product prices. The overall upward trend in the agricultural market is very clear. The current surge in agricultural product prices stems primarily from two real-world problems: first, extreme weather events in many parts of the world have severely disrupted crop planting and harvesting, resulting in lower-than-expected grain production; second, the escalating conflict between Russia and Ukraine has damaged key agricultural export facilities and disrupted transportation around the Black Sea. The Black Sea region accounts for more than a quarter of global wheat exports, and supply chain disruptions have directly triggered concerns about global food supply, driving wheat prices up to near their highest level in three years. Unlike the rapid transmission of energy price increases, the impact of agricultural product price increases is delayed. Energy price increases are almost immediately reflected in oil, electricity, and commodity prices, but price increases in grains such as wheat and corn require multiple stages, including processing, storage, transportation, and retail, before ultimately affecting final food prices. This means that even if energy prices gradually stabilize and decline, food inflation will persist for a considerable period, and inflationary stickiness will significantly increase. The dual pressure of rising energy and agricultural product prices has put global central banks in a dilemma: current inflation is not caused by overheated economies or excessive demand, but rather by structural inflation resulting from supply shortages and geopolitical conflicts. If central banks continue to tighten monetary policy and raise interest rates, it will not only fail to solve the commodity supply problem, but will also suppress the development of the real economy, further increasing the fiscal pressure on governments and escalating economic pressure. Precious metals are under pressure and falling, with both short-term negative factors and long-term support coexisting. In this round of monetary policy expectation adjustments, precious metals such as gold and silver have been most directly and significantly impacted. Since Warsh's hawkish speech, gold and silver prices have fallen by more than 4% in just a few days, mainly due to three real negative factors: the market's expectation of a short-term interest rate hike continues to rise, the real and nominal interest rates of various bonds are rising simultaneously, and the US dollar exchange rate continues to strengthen. The US dollar has maintained a strong trend since the Jackson Hole meeting. After precious metal prices broke through key technical support levels, many trend traders sold their positions and closed out their holdings, further accelerating the decline in gold and silver prices. From an investment perspective, rising bond yields mean a higher opportunity cost of holding non-interest-bearing safe-haven assets like gold and silver, making investors more inclined to choose bonds with interest income. A stronger dollar also significantly increases the cost for non-US investors to buy precious metals, directly suppressing market demand. However, from a long-term investment perspective, the decline in precious metal prices is merely a short-term fluctuation, and the long-term support logic remains intact. If central bank interest rate hikes are intended to effectively curb inflation, they will indeed put downward pressure on gold prices. However, the current rise in long-term bond yields is more due to market concerns about excessive national debt, massive government bond issuance, and pressure on fiscal credit. In this context, the safe-haven value of precious metals will gradually become more prominent. As government debt interest payments continue to increase and debt repayment pressure continues to rise, policymakers are likely to intervene to prevent unlimited increases in long-term market interest rates. This keeps gold in a constant state of tug-of-war between bulls and bears: in the short term, it faces downward pressure from high interest rates and a strong dollar, while in the long term, it can be supported by global debt concerns and currency devaluation risks. In addition, the continued gold purchases and optimization of foreign exchange reserve structures by central banks around the world have provided stable long-term support for gold prices. This kind of essential demand will not easily change due to short-term fluctuations in US interest rates. Industrial metals bucked the trend and strengthened, with supply and demand fundamentals dominating the market. Unlike the weak performance of precious metals, industrial metals were largely unaffected by the strengthening dollar and rising interest rates, exhibiting an independent upward trend. From a conventional market perspective, a stronger dollar and higher financing costs would increase the operating pressure on industrial enterprises, suppress industrial demand, and negatively impact industrial metal prices. However, the current extremely tight physical supply situation completely offset the impact of macroeconomic negative factors. Zinc prices are a typical example of this round of industrial metal price increases. Zinc prices on the London Metal Exchange steadily climbed to around $4,000 per ton, reaching a four-year high since May 2022. The core supporting factors are very clear: a continuous decline in global refined zinc inventories outside of China, raw material supply shortages, and tight spot market positions—multiple positive factors jointly propelled the continued strength of zinc prices. Copper prices have also remained strong, having previously broken historical highs, with London copper prices currently holding steady above $14,000 per ton. The current spot supply of copper is extremely tight, with a large amount of copper resources flowing into the US market, further tightening global spot circulation. Both copper and zinc markets are seeing spot prices higher than futures prices, the most direct signal of a tight physical supply, which continues to support the prices of both metals. The latest production data from Chile, the world's largest copper producer, also confirms the current shortage of industrial metals. Affected by severe storms and extreme weather in mining areas, Chilean mining operations were largely restricted, and the country's copper production in July fell by 9.4% year-on-year, further exacerbating the global supply shortage. The significant divergence between the price movements of precious metals and industrial metals demonstrates that this round of broad-based commodity price increases is not simply a financial rally driven by monetary easing and ample market funds, but rather a structural market driven by a genuine supply-demand gap in physical commodities. As long as the spot supply of commodities remains tight, the support from fundamentals will far outweigh the negative pressure from macroeconomic factors such as interest rates and exchange rates. Macroeconomic policies are caught in a dilemma, and the market's divergence continues. The market's performance in the coming weeks will determine which side, bulls or bears, will dominate. If prices of core commodities such as crude oil, refined oil, and grains continue to rise, market inflation expectations will remain high, and expectations for interest rate hikes by the Federal Reserve and other central banks will further intensify. In the short term, this will continue to suppress gold and silver prices, while also dampening overall market risk appetite and suppressing overall demand for various commodities. At the same time, rising market policy interest rates and long-term bond yields will significantly increase financing costs for countries worldwide. Currently, government debt levels in various countries are at historically high levels, and persistently high interest rates will continue to increase fiscal debt repayment pressure, making the market more focused on global debt sustainability, currency devaluation risks, and potential future market control policies from various countries. The core contradiction in the current commodity market is very clear: it is caught between high interest rates and high inflation, but the performance of different categories is completely divergent, exhibiting stark contrasts. Energy and agricultural products continue to rise in price due to supply shortages and geopolitical conflicts; industrial metals maintain their strength thanks to a tight spot supply and demand situation; while gold and silver are temporarily constrained by monetary tightening and a stronger dollar, facing short-term downward pressure. A clear paradox exists in the market: rising commodity prices are forcing market interest rates to remain high in the long term, while high interest rates will continue to exacerbate the fiscal pressure and debt risks of highly indebted countries. In the long run, this will reignite market concerns about currency devaluation and debt crises, and these factors are precisely the core logic supporting the long-term investment value of precious metals and driving long-term gold price increases.
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