Commodity wrap: Gold rebounds; oil gains on supply fears, Gulf tensions

Commodity wrap: gold recovers a tad; oil up on supply crisis, Gulf conflict

Gold prices rose slightly on Tuesday as some form of buying returned after the yellow metal plunged to a four-month low in the previous session. 

Silver prices also rose 1% on COMEX as the metal tries to defend its gains above $70 per ounce. 

Meanwhile, Brent oil prices continued to trade above $100 per barrel as concerns about supply disruptions remained the focus of the market. 

Additionally, base metals prices were all in the red on Tuesday. 

“Copper and the broader base metals complex are giving back part of yesterday’s sharp rally this morning as markets remain firmly headline driven, with the market struggling to price a conflict that continues to shift by the hour,” Neil Welsh, head of metals market at Britannia Global Markets, said in an emailed commentary. 

“After a strong bounce sparked by hopes of a temporary de‑escalation in the Middle East, sentiment has softened again as reports suggest the Gulf conflict may not be on track as first thought, keeping risk appetite fragile and volatility elevated.”

Gold up a tad

The extreme volatility in gold prices persists, with a further slump on Monday that compounded last week's sharp decline. 

Gold briefly dipped below $4,100, resulting in an overall loss of 18% from the support level seen last week.

However, prices have recovered somewhat in Tuesday's session, and the yellow metal was trading above $4,445 per ounce, up 0.2% from the previous close. 

“Selling accelerated after support around $5,000 per ounce finally gave way,” said David Morrison, senior market analyst at Trade Nation. 

“The move was exacerbated as investors rushed to unwind positions, spurred on by the stronger US dollar and a jump in Treasury yields. Both moves reduced the appeal of non-interest-bearing bullion.”

The sharp, dramatic decline has prompted speculation that the move is excessive. 

However, the rapidity of the drop likely triggered panic, forcing recent purchasers to quickly liquidate their holdings.

“Many players will have been badly bruised by the gold market over the last two months, especially as the calls for it to continue to rise to $10,000 or beyond intensified throughout its parabolic rise at the beginning of this year,” Morrison added. 

Meanwhile, silver on COMEX was last around $70 per ounce, up 0.8% from the previous close. 

Oil climbs

Oil prices climbed on Tuesday, driven by the ongoing, significant global supply disruption and by Iran's rebuttal of a US negotiation claim. 

Iran denied holding talks with the US to resolve the conflict in the Gulf, which contradicted President Donald Trump's assertion that a resolution could be imminent.

Crude futures plummeted over 10% on Monday following President Trump's five-day postponement of strikes on Iranian power plants. 

This delay was attributed to "major points of agreement" reached during talks with unnamed Iranian officials, according to Trump.

The Strait of Hormuz, a critical chokepoint, has seen shipments of nearly one-fifth of the world’s oil and liquefied natural gas effectively halted due to the ongoing conflict.

This disruption is so severe that the International Energy Agency has characterized it as the most significant oil supply crisis ever recorded.

On Tuesday, Iran launched a barrage of missiles towards Israel. 

According to a Reuters report, a source who wished to remain anonymous, President Trump seemed set on securing an agreement. 

However, these officials considered it highly improbable that Iran would concede to US demands in any subsequent negotiation talks.

At the time of writing, the Brent crude oil price was at $102.44 per barrel, up 2.5%, while the West Texas Intermediate crude was at $91.02 per barrel, up 3.3% from the previous close.