Commodity wrap: dollar strength, Fed uncertainty weigh on bullion; oil recovers

Gold prices fell on Monday due to a stronger dollar against a basket of major currencies.

Silver prices also declined slightly as the dollar strengthened and weighed on sentiment.

Meanwhile, oil prices also fell earlier in the day before stabilising somewhat. Oil prices had experienced steep losses last week due to growing optimism over a peace deal between Russia and Ukraine.

Most base metal prices were in positive territory on Monday due to a steady risk sentiment across markets.

Gold falls

Gold prices fell as the dollar rose against major currencies, putting pressure on overseas buyers.

As the dollar strengthens, commodities such as gold and silver become more expensive for holders of other currencies, limiting demand for the commodities.

Gold, priced in the greenback, became more expensive for those holding other currencies as the dollar remained close to the six-month high it reached on Friday.

“As things stand, it’s difficult to see what may trigger a move in gold in either direction,” said David Morrison, senior market analyst at Trade Nation.

On Friday, New York Fed President John Williams indicated that reducing US interest rates could be done without jeopardising the Federal Reserve's inflation target.

He added that such a move would also help to protect against a downturn in the labour market.

Following dovish comments from Williams, the probability of a rate cut next month, as tracked by the CME FedWatch tool, dramatically increased from 40% on Friday to 76%.

At the time of writing, the COMEX gold contract was at $4,113.15 per ounce, down 0.1%, while silver was 0.2% down at $49.835 per ounce.

Oil falls

Oil prices stabilised on Monday, recovering from an approximately 3% drop last week.

Investors are currently balancing the possibility of a US interest rate reduction against the chance of a Ukraine peace agreement, which could result in relaxed sanctions on Russia, a significant oil producer.

The US and Ukraine are scheduled to restart work on a revised peace plan, aiming to meet the Thursday deadline set by US President Donald Trump.

This decision follows their agreement to modify an earlier version of the plan, which had drawn criticism for being overly favourable to Moscow.

“This increased likelihood of a breakthrough deal could ultimately lead to increased supply should sanctions on Russian energy be removed,” Morrison said.

On Sunday, US Secretary of State Marco Rubio indicated that the Thursday deadline may not be definitive.

At the time of writing, the price of West Texas Intermediate crude was at $58.18 per barrel, up 0.6%, while Brent was at $62.05 per barrel, up 0.2%.

Base metals

Base metals were generally trading higher at the start of the week on Monday, supported by improved broader risk sentiment and stronger Asian equity markets.

However, trading activity remains subdued, with modest ranges and volumes, as the market anticipates quieter conditions ahead of the US Thanksgiving holiday, according to Neil Welsh, head of metals at FCA-regulated multi-asset brokerage Britannia Global Markets.

Copper is an exception, lagging behind the positive movement after its recent strong performance.

Meanwhile, US copper inventories have surged to an all-time high of 402,876 short tons at CME warehouses.

This increase is driven by traders accelerating shipments, anticipating that American tariffs on copper cathode may be imposed after a review in 2026.

“The looming risk of import duties under a potential new administration has driven the US copper price premium over global benchmarks, tightening stocks elsewhere in the process,” Welsh said.

Traders will be looking at physical supply narratives, trade negotiation updates, and evolving macroeconomic sentiment as the year-end approaches.