Commodity wrap: gold dips to 6-weeks low, Brent crude jumps 6%

Gold prices plunged to nearly six weeks low on Wednesday due to a stronger dollar and diminishing hopes for a US Federal Reserve interest rate cut. 

Silver prices on COMEX fell to a one-month low, tracking sharp losses in gold. 

Meanwhile, Brent crude oil jumped 6% on Wednesday as Iran threatened to take out several oil facilities in Saudi Arabia, Qatar and the United Arab Emirates. 

Gold falls below $4,900

Gold prices plunged below $4,900 after slipping from the psychologically crucial level of $5,000 per ounce on Wednesday. 

A stronger US dollar made gold more expensive for non-dollar holders as the precious metal is priced in the greenback. 

Despite a strong effort to maintain a relatively tight range around $5,000, gold's recent failure to break above the $5,200 resistance last week suggests that bearish sentiment may now be prevailing.

At the time of writing, the COMEX gold contract was at $4,864 per ounce, and had fallen to a low of $4,838, its lowest level since February 6.

Silver prices slipped to a one-month low of $75.700 per ounce.

Gold is a traditional safe haven asset during times of uncertainty. However, it typically underperforms when interest rates are high because it does not generate any yield.

The Federal Reserve is anticipated to keep interest rates unchanged following its meeting today. 

However, the Fed is also expected to offer its perspective on how the outlook for the US economy, inflation, and monetary policy has been reshaped by President Donald Trump's decision to initiate an open-ended conflict in the Middle East.

Concurrently, a Labor Department report indicated that US producer prices rose more than forecast in February, with the potential for further acceleration due to the ongoing war.

“Much now depends on whether buyers come in to support gold if prices fall further,” said David Morrison, senior market analyst at Trade Nation. 

“The trouble for the bulls, as things currently stand, is that there’s no appetite for gold as a ‘flight to safety’ trade. No doubt many would-be purchasers have been put off by gold’s plunge from record highs at the end of January.”

Brent jumps over 6%

Brent crude prices jumped over 6% on Wednesday following threats from Iran's Revolutionary Guards against several energy facilities in Saudi Arabia, the UAE, and Qatar. 

This threat, made in retaliation for an attack on Iran's own energy sites, has increased the risk of further regional energy supply disruptions.

Benchmark Brent futures prices have settled above $100 per barrel for the past four sessions, reflecting a lack of de-escalation in the Iran conflict.

The price of Brent was last at $109.95 per barrel, up 6.3%, and that of West Texas Intermediate crude was at $98.17 a barrel, up 2.8% from the previous close. 

Meanwhile, following an agreement between Baghdad and the Kurdistan Regional Government on Tuesday, the North Oil Company in Iraq confirmed that oil exports via pipeline have restarted, according to a Reuters report.

The conflict with Iran severely impacted Iraq's primary southern oilfields, leading to a 70% drop in crude production to just 1.3 million barrels per day (bpd). 

This substantial reduction in output, where most of Iraq's oil is produced and exported, resulted from the effective closure of the crucial Strait of Hormuz, a chokepoint for approximately 20% of the world's oil supply.

Iran's anti-ship missiles near the Strait of Hormuz prompted the US military to strike sites along the Iranian coastline on Tuesday.

The US stated this action was necessary due to the risk posed to international shipping in the area.

Also on Tuesday, Iran confirmed the death of its security chief, Ali Larijani, in an Israeli attack.

Flows from Libya's Sharara oilfield are now being gradually rerouted via alternative pipelines, the National Oil Corporation stated early Wednesday, following a fire that had broken out.

“Oil flows remain largely constrained, despite hopes that Iran might allow additional tankers to move through the Strait of Hormuz to select countries,” Warren Patterson, head of commodities strategy at ING Group, said in a note. 

“However, if Iran’s plan is to inflict pain through higher energy prices, the number of tankers it allows through the Strait of Hormuz may be very limited.”