Commodity wrap: gold jumps as weak US data fuels bets on Fed rate cut; oil rises

Oil prices rose slightly on Tuesday as concerns over the latest US sanctions on Russian supply raised fears among investors. 

Meanwhile, gold prices continued to rise with investors betting on the US Federal Reserve to cut interest rates at their next meeting. 

Silver also gained on Tuesday, tracking the movement in gold prices. Silver actually outperformed gold, rising by more than 5%. 

Among other precious metals, the prices of platinum and palladium also rose significantly.

Oil rises

Crude oil prices held steady for most of the day before rising by 0.8%.

Market stability was achieved as concerns about excess supply offset the ambiguity surrounding how the latest US sanctions would affect Russian oil.

The repercussions of US sanctions against Russia, particularly their influence on the crude oil and refined fuel markets, remain a focus of ongoing investor evaluation.

Lukoil's declaration of force majeure at an Iraqi oilfield it operates is the most significant consequence yet of sanctions imposed last month, according to a Reuters report on Monday. 

PVM analyst Tamas Varga noted that oil prices are being supported by this restriction of fuel exports due to the sanctions, despite an existing crude oil glut.

Oil prices remain capped due to concerns about a global oversupply of crude. 

While OPEC+ previously agreed to raise December output targets by 137,000 barrels per day, the group also decided to halt further increases during the first quarter of next year.

While most energy prices have fallen this year, gasoil is an exception.

The next-due ICE contract is nearly $750 per ton, up about 7.5% year-to-date, despite Brent crude being 14% cheaper, according to Commerzbank AG’s commodity analyst Barbara Lambrecht. 

Consequently, the gasoil crack spread has surged to over $30 per barrel, its highest since February 2024, she said.

At the time of writing, the WTI crude price was at $60.76 per barrel, up 1%, while Brent was $64.71 per barrel, also up 1% from the previous close. 

Gold rallies

Since yesterday's market opening, the price of gold has increased by as much as 3.7%, or $150, reaching $4,150 per ounce.

“In the case of gold, this is surprising, as the higher risk appetite due to hopes for a settlement of the US government shutdown, which has been going on for a good 40 days, could actually have caused headwinds,” Carsten Fritsch, commodity analyst at Commerzbank, said in a report. 

Recent weaker US economic data, notably US consumer confidence dropping to a 3½-year low, made a December interest rate cut by the US Federal Reserve more likely, an effect which apparently outweighed the initial fact.

A significant slowdown in the US economy is an obvious expectation, and this will become apparent once data publication resumes.

Fritsch said:

Commerzbank economists believe that the gold price is set for further increase because a greater degree of interest rate cuts is anticipated next year than currently factored in by the markets.

“We expect gold to reach USD 4,200 per troy ounce in the coming year,” Fritsch said. 

The projected trading prices are $50 per troy ounce for silver, $1,700 per troy ounce for platinum, and $1,400 per troy ounce for palladium, according to Commerzbank.

Meanwhile, among other metals, the three-month copper contract on the London Metal Exchange was trading at $10,861.50 per ton, up 0.4%. 

However, aluminium, zinc, and nickel contracts were all in the red on Tuesday. 

Commerzbank analysts have raised their forecast for copper prices, and now see the red metal trading at $10,500 per ton by the end of the year, compared with their previous forecast of $9,600 per ton.