Commodities fell for the first time since March as rising COVID-19 infections weighed on crude demand in September while a stronger U.S. dollar dimmed the appeal of gold.
The S&P GSCI index, which tracks futures for 24 raw materials, fell 2.2% in September, snapping five months of growth. The drop increased the index's year-to-date loss to nearly 20%.
Energy prices were among the worst performers, with Brent crude and natural gas futures down 6.6% and 3.9%, respectively.
Last month, the International Energy Agency cut its oil demand outlook by 300,000 barrels per day for 2020, citing renewed oil demand weakness led by China and India along with concerns over the persistent challenges of the coronavirus pandemic.
The Organisation for Economic Co-operation and Development on Sept. 14 revised down its projection of global demand by 400,000 barrels per day for this year.
Dollar rebound hits gold
Following a minor pullback in August, gold lost 4.2% in September as a stronger U.S. dollar sapped appetite for precious metals. However, the yellow metal is 24.5% higher so far in the year.
The Dollar Index advanced 1.9% in September, after five straight months of losing ground to its developed-market peers. But the dollar's decline through August was propelled by Federal Reserve policy, and so currency strategists said they do not expect September's reversal of the downward trend to last.
Looking ahead, commodity analysts at TD Securities believe that the yellow metal's recent price pullback is "unlikely to turn into a rout."
"The secular bull market is intact, as long-term inflation expectations will likely continue to rise post-election," wrote the analysts led by Bart Melek, head of commodity strategy at TD Securities, in a Sept. 24 note.
Silver plunged nearly 18% last month, reversing its rally in August.
While the potential rebound in industrial applications bodes well for silver, the fourth quarter could be "payback time" for the metal from a price perspective, according to a Sept. 14 presentation by Gregory Shearer, vice president, global commodities research, at J.P. Morgan Securities PLC.
"As investors begin to cool on gold after real yields likely find a firmer consistent floor, silver will likely be hit doubly hard given its smaller market size and reduced liquidity," Shearer said.
Wild boar disease in Germany boosts lean hogs
The livestock index advanced 8.3% as lean hogs futures surged 17.7% month over month. China, Japan and South Korea in September suspended German pork imports due to African swine fever, boosting global prices amid a rise in demand for meat from other major suppliers.
Soybeans returned to year-to-date growth after futures advanced 7.3% last month amid continued purchases from China and falling U.S. stockpiles.
There is a risk that China may pause its buying as a result of the recent rally in corn and soybeans, Ole Hansen, head of commodity strategy at Saxo Bank, wrote in an Oct. 1 note. In addition, a stronger dollar could reduce overseas demand for U.S. farm products.