Commodity wrap: Fed caution hits bullion hard, Russian supply concerns boost oil

Gold prices slumped more than 3% on Friday as a December interest rate cut by the US Federal Reserve looks less likely. 

Silver prices on COMEX plunged over 5%, tracking losses in the yellow metal.

Silver has gained sharply over the last few sessions, and had overshadowed gold’s rise.

Oil prices on the other hand, climbed more than 1% on concerns about lower supply from Russia. 

Meanwhile, base metal contracts dropped after hawkish comments from the US Fed dented hopes for a December rate cut. 

Copper prices slumped 1.2% to $10,774.80 per ton, while aluminium was trading at $2,846.48 a ton, also down 1.2% on the London Metal Exchange. 

Bullion slumps

Both gold and silver had a positive week until Friday, as prices fell sharply after Fed officials cautioned against a December rate cut. 

Federal Reserve officials conveyed a cautious outlook on Thursday, indicating no immediate need for interest rate cuts. 

San Francisco Fed President Mary Daly stated it is "premature" to commit to a December rate cut, citing a noticeable slowdown in the labor market and easing, though "still stubborn," inflation. 

Boston Fed President Susan Collins shared this view, emphasizing a "relatively high bar for additional easing in the near term" and cautioning that further policy support could jeopardise inflation's return to 2%.

Lower interest rates benefit gold and silver as both are unyielding assets, unlike bonds. 

Additionally, St. Louis Fed President Alberto Musalem advised a cautious approach, stating that there is "limited room for further easing." 

Minneapolis Fed President Neel Kashkari, who had opposed the October cut, indicated he is still undecided about a potential move in December.

While the daily MACD points to upward momentum, gold might require a period of further consolidation before advancing, given the strong bounce-back observed over the last week, according to David Morrison, senior market analyst at Trade Nation.

At the time of writing, the COMEX gold contract on COMEX was at $4,046.31 per ounce, down 3.5%, while silver was 5.2% lower at $50.370 an ounce. 

Oil rises

Supply concerns drove oil prices up over 1% on Friday, following the suspension of oil exports from Russia's major energy hub, the Black Sea port of Novorossiysk. 

The halt was a consequence of a Ukrainian drone attack on an oil depot within the facility.

Russian officials reported that Friday's attack in Novorossiysk injured three crew members of a ship and caused damage to the vessel, an oil depot, and nearby apartment blocks.

Trade Nation’s Morrison said:

At the time of writing, the price of West Texas Intermediate crude oil was at $59.79 a barrel, up 1.9%, while Brent was at $63.99 a barrel, up 1.6%.

Crude prices saw an increase following a drop of approximately 3% for both Brent and WTI on Wednesday. 

This earlier decline was triggered by an OPEC report that revised its forecast, projecting global oil supply to meet demand in 2026, contrary to its previous expectation of a supply shortfall.

Further dampening the market, the US Energy Information Administration's Thursday report indicated a greater-than-anticipated increase in US crude stocks for the prior week, alongside a smaller-than-expected decrease in gasoline and distillate inventories.