Commodity wrap: gold rebounds on renewed Fed rate cut hopes; oil, nickel face weekly declines

After having spent most of the day in the red, gold prices rebounded due to renewed expectations of a December interest rate cut by the Federal Reserve. 

On the other hand, silver prices dipped nearly 2%, but hopes for a rate cut limited losses. 

Oil prices fell, and were set for a weekly decline as the US pushed for a peace deal between Russia and Ukraine. 

Meanwhile, base metals were mixed with copper and nickel largely flat, while aluminium and zinc fell. 

Gold rebounds

Gold experienced a rebound on Friday, partially offsetting its earlier intraday losses. 

This recovery was fueled by renewed expectations for a near-term interest rate cut, which arose following recent statements from Federal Reserve (Fed) officials. 

Specifically, New York Fed President John Williams indicated that he still sees potential for a rate cut in the near future, helping the metal reverse its previous decline.

At the time of writing, the COMEX gold contract was at $4,067.35 per ounce, up 0.2% from the previous close. 

In recent weeks, the cautious statements from most Fed officials have led markets to reduce their anticipation of a December rate cut.

Despite some cooling, the labour market remains resilient, which, coupled with persistently sticky inflation, has led policymakers to repeatedly caution that a more patient approach is warranted.

Following a day of developments, market expectations for a December rate cut have significantly increased, now sitting at a 75% probability compared to approximately 31% earlier. 

This anticipated reduction in interest rates generally supports the appeal of non-yielding assets, such as gold.

Meanwhile, silver prices on COMEX were at $49.220 per ounce, down 2.1% from the previous close. 

Oil falls

Oil prices declined for a third straight session on Friday, dragged by the prospect of increased global supply stemming from a potential Russia-Ukraine peace deal supported by the US, and subdued investor risk appetite due to ongoing uncertainty surrounding interest rates.

Market sentiment shifted to bearish as Washington began pushing for a peace plan to conclude the three-year war between Ukraine and Russia. 

This comes as sanctions targeting Russian oil producers Rosneft and Lukoil are scheduled to be implemented on Friday. 

In response to the development, Ukrainian President Volodymyr Zelenskyy confirmed his intention to cooperate with Washington on a strategy to end the conflict.

At the time of writing, the price of West Texas Intermediate crude oil was at $57.95 per barrel, down 1.8%, while Brent was at $62.44 per barrel, down 1.4%. 

Both benchmarks have shed 2% so far this week. 

“The main catalyst for this week’s decline has been the prospect of a Russia–Ukraine peace plan,” said David Morrison, senior market analyst at Trade Nation. 

The agreement, drafted by the US and Russia without Ukraine's involvement, reportedly requires Kyiv to surrender a significant amount of its territory and accept limitations on its military capabilities.

Morrison said:

Base metals

Goldman Sachs forecasts that copper will be constrained to $11,000 per ton for the next two years, citing a "modest surplus." 

However, the metal is predicted to rally starting in 2028 as supply struggles to keep pace with demand.

Despite the upward revision, the bank's analysts, including Eoin Dinsmore, raised the December 2025 forecast for copper to $10,610 from $10,385. 

This increase was attributed in a note to a fourth-quarter price rally stemming from robust demand and possible strategic stockpiling, set against the context of supply constraints.

Nickel prices have recently hit their lowest point in over seven months on the London Metal Exchange, driven by forecasts of increasing global stockpiles. 

The metal, a key component in stainless steel and batteries, has experienced a decline exceeding 3% this week, marking its longest consecutive run of weekly losses since January. 

Increased production from Indonesia, a major producer, has led to a market surplus, making nickel the LME's poorest performer this year with a 6% drop.

According to a note from Chinese brokerage Industrial Futures Co., the outlook for demand is currently very pessimistic, and expectations for a tightening of mine supplies have diminished as the year draws to a close.

“In the base metals markets, participants are likely to focus on China,” Barbara Lambrecht, commodity analyst at Commerzbank AG, said in a report. 

The government is reportedly contemplating further actions to bolster the construction industry, which is currently facing significant difficulties.