Commodity wrap: oil slumps 2% on Gaza ceasefire, gold moves back over $4,000/oz

Oil prices slumped 2% on Friday as the risk premium wore off after Israel and the Palestinian militant group Hamas agreed to a ceasefire earlier this week. 

Meanwhile, gold resumed its rally with prices on COMEX moving back above the historic level of $4,000 per ounce. 

Silver prices on COMEX also jumped 2% as the metal tracked gold’s gains. 

Among base metals, copper and nickel were down, while aluminium was flat. Zinc prices were higher on Friday. 

Oil slumps

Oil prices slumped 2% as the sell-off continued from earlier this week. 

Analysts had predicted that prices would slip by 1-2% after the peace deal between Israel and Hamas, which alleviated supply concerns in the Middle East. 

Though Israel is not a major producer of crude oil, the Middle East region sits on over half of the world’s oil reserves. 

Any escalations in geopolitical tensions put these reserves at risk. 

The Israeli government ratified a deal on Friday that will halt fighting and involve a partial Israeli withdrawal from Gaza. 

In exchange for hundreds of prisoners held by Israel, Hamas will release all remaining hostages captured during the attack that initiated the war.

At the time of writing, the price of West Texas Intermediate crude oil was at $59.99 per barrel, down 2.5%, while Brent was down 2.3% at $63.73 per barrel. 

Though oil prices had recovered somewhat this week from last week’s sharp losses, Friday’s slump means the commodity was headed for a second straight weekly loss. 

On a weekly basis, Brent prices slipped 1.7%, while WTI lost 1.9%. 

Oil prices rose by approximately 1% on Wednesday, reaching a one-week high.

This increase was attributed to a lack of progress in Ukraine peace negotiations, suggesting that sanctions against Russia, the world's second-largest oil exporter, are likely to persist.

Gold moves back above $4,000

Gold prices have been gaining strength from strength this year as inflows into the exchange-traded fund (ETFs) have shown remarkable momentum. 

September saw record inflows into gold ETFs, as reported by the World Gold Council.

“Undoubtedly, the high nominal figures are also due to record prices,” Barbara Lambrecht, commodity analyst at Commerzbank AG, said in a report. 

Despite this, September recorded net inflows exceeding 145 tons, making it the 11th strongest month out of over 250 since the introduction of ETFs in spring 2004.

North America is showing significant buying interest, possibly influenced by the weak US dollar.

The US purchased just under 90 tons, making up over 60% of total acquisitions, while Europe's inflows were less than half that figure.

At the time of writing, the COMEX gold contract was at $4,001.22 per ounce, up 0.7% from the previous close. 

Among other precious metals, silver prices were 2.7% higher at $48.445 per ounce, while platinum rose 0.8% at $1,669 per ounce. 

Base metals

In recent weeks, iron ore has traded on the Singapore Stock Exchange, settling into a price range of $100 to $110 per ton.

At the end of this week, it even rose slightly again after the end of Golden Week in China.

“One reason for this is likely to be the stabilisation of Chinese steel production: data from September indicates that it has recently stopped declining compared to the previous year, Volkmar Baur, FX analyst at Commerzbank, said. 

Meanwhile, nickel has recently underperformed other major base metals, even falling behind zinc, which previously held the lowest position.

This makes nickel the weakest performer among these metals this year.

So far, it has posted a gain of just around 1% since the beginning of the year.

The market's current perspective is likely to be substantiated by the International Nickel Study Group's (INSG) newest projections.

Experts foresee a favourable nickel supply market, leading to a downward trend in prices. 

Despite the Indonesian government's attempts to tighten regulations on domestic production, it anticipates continued production expansion in the current and upcoming years.

At the time of writing, the three-month nickel contract on the London Metal Exchange was at $15,304.63 per ton, down 1.1%. 

Investors will be monitoring the LME Week event next week closely.