Commodity wrap: gold eases from record highs as oil slips on supply hike reports

Most commodities were in bear territory on Tuesday, with bullion, oil and copper experiencing price declines. 

Gold prices eased from their record highs, while silver also fell more than 1%. 

Oil prices extended losses from Monday as the Organization of the Petroleum Exporting Countries and allies plan to raise oil production further. 

Copper prices eased as well as investors booked profits. 

Gold eases

Gold prices continue their ascent, reaching unprecedented levels. On Monday, the price of spot gold surpassed $3,800 per troy ounce for the first time, and this morning, it set a new all-time high of $3,856 per troy ounce.

On COMEX, prices had reached nearly $3,900 an ounce earlier today. 

However, gold prices declined on Tuesday as investors engaged in profit-taking after the metal reached a record high earlier in the session. 

The losses were mitigated by worries of a US government shutdown and increased speculation of a Federal Reserve interest rate cut.

A White House meeting between US President Donald Trump and his Democratic opponents yielded minimal progress in averting a potential government shutdown. 

This shutdown, which could impact numerous services, is looming as early as Wednesday.

According to CME Group's FedWatch tool, markets are anticipating an 89% probability of a 25-basis-point interest rate cut at the Federal Reserve's October meeting. 

Investors are currently awaiting upcoming US economic data, including Friday's non-farm payrolls report, for additional insights into the economy's condition.

Silver prices also fell, but the metal continues to rise disproportionately and had breached the $47 per troy ounce mark on Monday for the first time since 2011.

Oil slips

Oil’s decline was driven by expectations of an upcoming production hike by OPEC+ and the recommencement of oil exports from Iraq's Kurdistan region through Turkey, both factors contributing to market anticipation of a supply surplus.

Brent and West Texas Intermediate crude oil prices continued their decline on Tuesday, extending losses from the previous trading session. Both benchmarks settled over 3% lower, marking their most significant daily drop since August 1.

Reports claimed that OPEC+ is expected to raise production further during November and December. 

OPEC kingpin Saudi Arabia is poised to increase its market share, driven by persistently high prices.

However, similar to the previous month, this production increase is expected to be modest, at 137,000 barrels per day.

Barbara Lambrecht, commodity analyst at Commerzbank AG, said:

Meanwhile, on Saturday, crude oil began flowing again through a pipeline from Iraq's semi-autonomous Kurdistan region to Turkey. 

This marks the first flow in two and a half years, following an interim deal that resolved a previous deadlock, according to Iraq's oil ministry.

In recent weeks, the market has maintained a cautious stance. 

This caution stems from a balancing act between supply risks, primarily due to Ukraine's drone attacks on Russian refineries, and expectations of an oversupplied market coupled with weak demand. 

Base metals

The three-month copper contract on the London Metal Exchange was at $10,350 per ton, down nearly 1% from the previous close. 

The aluminium contract was slightly down at $2,678.30 per ton. 

Positive news from China had set a supportive tone for base metals at the start of the new week. 

The Ministry of Industry and Information Technology in China announced on Sunday that the average production increase for the 10 primary non-ferrous metals, including copper and aluminum, is projected to be only 1.5% for both this year and next. 

This marks a significant slowdown compared to the approximately 5% growth observed over the past two years.

“This is likely to primarily affect copper production, which grew by even more than 5% in 2023 and 2024,” Thu Lan Nguyen, head of FX and commodity research at Commerzbank, said in a report. 

This strategic decision reflects the Chinese government's commitment to tackling overcapacity, a major factor that has severely impacted profit margins across various industries.