Commodity wrap: Gold slips to 2-month low, while oil dips on Iran peace hopes

Most non-agricultural commodities were in the red on Wednesday with gold dipping to a two-month low due to concerns about inflation. 

Meanwhile, among base metals, aluminium and copper contracts were also down on the London Metal Exchange. 

Oil prices extended their losses as both Brent and West Texas Intermediate crude benchmarks slipped over 3% on prospects of a deal between the US and Iran. 

Gold falls to a two-month low

Gold slid close to 2% following renewed US military action in the Persian Gulf, while silver tracked the downturn in lockstep.

“As has been the case in recent weeks, the inverse relationship between the price of gold (or silver) and the price of oil continues to hold,” Commerzbank AG analysts said in a report. 

Gold prices slipped to a two‑month low on Wednesday, weighed down by expectations of tighter monetary policy aimed at curbing inflation and lingering uncertainty over the war in Iran.

COMEX gold fell 1.6% to $4,462.97 per ounce after touching its weakest level of $4,431.42 since March 27 earlier in the session.

Bullion has remained under pressure since the outbreak of the US–Israeli war with Iran, with the effective closure of the Strait of Hormuz driving Brent crude prices higher, stoking inflation fears, and reinforcing expectations of US rate hikes.

On Wednesday, Iranian state television reported that Tehran would restore shipping through the strait to pre‑war levels within a month under a framework deal with Washington that would also see US forces withdraw from Iran’s vicinity.

Gold prices briefly pared some losses after the announcement.

Still, markets continue to anticipate energy‑driven inflation, prompting the Federal Reserve to raise its benchmark overnight interest rate by 25 basis points before year‑end.

Although gold is traditionally viewed as an inflation hedge, the non‑yielding metal tends to struggle in high‑rate environments.

Minneapolis Fed President Neel Kashkari said the central bank must remain focused on containing inflationary risks that appear to be building, though he cautioned it was “far too soon” to predict when policy rates might change. 

Investors are now awaiting Thursday’s release of the US Personal Consumption Expenditures data for further clues on the Fed’s monetary policy path.

The silver contract on COMEX was last at $74.653 per ounce, down 2.6% from the previous close. 

Base metals

Aluminium prices have recently surged to their highest level since 2022, driven largely by concerns over production cuts in China.

The government is pushing to reduce overcapacity in the manufacturing sector, raising fears of tighter supply in the global market.  

Analysts at Mysteel Global report that some smelters, particularly in Guangxi province, have already scaled back output. 

Inventories are piling up as weak domestic demand weighs on the market, and stronger foreign demand has not been sufficient to offset the slowdown at home. 

“This is rather remarkable given that supply disruptions in the Gulf region following the closure of the Strait of Hormuz should actually have opened up a supply gap equivalent to almost 10% of global production,” Thu Lan Nguyen, head of FX and commodity research at Commerzbank AG. 

This shortage is reflected in significantly higher regional premiums (for example, in Europe and the United States), which should make it highly profitable for Chinese producers to export their excess metal.

However, prices slipped on Wednesday, with the three-month contract at $3,632.10 per ton, down 1.3% from the previous close. 

Meanwhile, the copper contract on LME also fell 0.6% to $13,559.20 per ton on Wednesday. 

Oil slides

Oil prices swung sharply on Wednesday as traders balanced signs of progress in US–Iran peace talks with renewed American military strikes, highlighting the fragile mix of diplomacy and conflict.

Brent crude dropped more than 3% to about $95 a barrel, while West Texas Intermediate slid 3.3% to $90.89.

Earlier in the session, both benchmarks had fallen even lower, with Brent touching $91.78 per barrel and WTI dipping to $87.80, before recovering slightly.

Brent’s losses on Wednesday more than erased the gains it had made a day earlier.

Both Brent and WTI touched intraday lows of $94.16 and $87.77 per barrel, marking their weakest levels in over a month.

Iranian state television reported that the US will withdraw its military forces from areas near Iran and lift its naval blockade, while ship traffic through the Strait of Hormuz would be managed jointly by Iran and Oman.

Meanwhile, Israel intensified its bombing in Lebanon on Tuesday, further complicating peace efforts.

After an April ceasefire in the three‑month conflict, both sides had signaled progress toward reopening the strait.

The International Energy Agency estimates that Iran’s effective closure of the Strait of Hormuz has removed more than 14 million barrels per day of Middle East oil supply from the market, underscoring the scale of disruption.