Commodity wrap: gold continues climb on safe-haven demand; oil prices steady

Gold prices continued to climb on Tuesday due to increasing safe-haven demand for the precious metal. 

Oil prices were steady after rising more than 1% in the previous session as the Organization of the Petroleum Exporting Countries and allies opted for a modest increase in production for November. 

Silver prices were in the bear territory, while copper on the London Metal Exchange was slightly higher. 

Gold hits record high

The December gold contract on COMEX breached the $4,000-per-ounce mark on Tuesday briefly for the first time ever. 

This situation is, according to some media reports, a result of the current US government shutdown.

“While the shutdown may dampen the economic outlook for the US in the short term, it is unlikely to be the decisive reason for gold's continued strength,” Thu Lan Nguyen, head of FX and commodity research at Commerzbank AG, said in a report. 

On Monday, the White House downplayed President Donald Trump's assertion that government employees were already being laid off due to the shutdown.

However, they cautioned that job losses could still occur as the impasse entered its seventh day. 

The ongoing shutdown has also delayed the release of crucial economic indicators, compelling investors to depend on secondary, non-government data to assess the timing and extent of potential Fed rate cuts.

Commerzbank anticipates continued strong support for gold prices, with further upside driven by expected significant US interest rate cuts. 

The bank’s updated forecast is $4,000 per ounce by year-end and $4,200 per ounce by the end of next year, an increase from its previous projections of $ 3,600 and $3,800, respectively.

Oil prices steady

On Tuesday, oil prices remained stable as investors weighed OPEC+'s smaller-than-anticipated November output increase against expectations of oversupply.

In the prior session, both contracts saw a settlement increase of over 1%. 

This followed the decision by OPEC+ to boost its combined oil production by 137,000 barrels per day, effective in November.

Contrary to market expectations of a more aggressive reintroduction of supply, the group's cautious approach to increasing its production share signals concerns about a predicted oil supply surplus in the fourth quarter and next year, according to ING analysts.

“Even though the production increase was smaller than feared, it comes at a time when the supply outlook is already favorable,” Nguyen said. 

At the time of writing, the price of West Texas Intermediate crude oil was at $61.88 per barrel, largely unchanged from the previous session. 

Brent crude was also flat at $65.49 a barrel. 

Copper prices

Copper prices have hit nearly $10,800 per ton, marking their highest point since May of last year.

Prices increased due to worries about supply disruptions last year. This was caused by problems in mine production, specifically the unexpected closure of Panama's largest mine.

“At the time, we also cautioned that the price increase was largely driven by expectations, calling for prudence,” Commerzbank’s Nguyen added. 

The leading copper-producing nation globally sustained robust production growth. However, in the second half of the year, a price correction followed.

“For similar reasons, we remain skeptical this time that the current price levels are justified,” Nguyen said. 

At the time of writing, the three-month copper contract on LME was at $10,694 per ton, up 0.5% from the previous close.