Commodity wrap: gold climbs to one-week highs as Fed rate-cut bets surge; oil prices remain volatile

Gold prices rose to an over one-week high on Wednesday as hopes for an interest rate cut by the US Federal Reserve next month increased.

Silver prices also rose 1%, tracking gains in gold, with the metal nearing the $52 per ounce level.

Meanwhile, oil prices were volatile throughout the day amid uncertainty over a peace deal between Russia and Ukraine.

Gold climbs

Gold, a non-yielding asset, remained attractive as prices stayed near an over one-week high on Wednesday. This was primarily driven by expectations that the US Federal Reserve is likely to reduce interest rates next month.

At the time of writing, the COMEX gold contract was at $4,181.20 per ounce, up 0.4% from the previous close. Silver prices on COMEX were 1.3% higher at $51.743 an ounce.

Gold is currently positioned near the upper limit of its recent trading channel, showing stability around the $4,150 level.

Throughout most of the current month, the price has been constrained between a support of $4,000 and a resistance ceiling of $4,200, according to David Morrison, senior market analyst at Trade Nation.

The likelihood of the Fed implementing another 25-basis-point rate cut next month has increased substantially since Friday.

This jump in probability, driven by a dovish speech from New York Fed President John Williams that overshadowed earlier hawkish comments from other Fed officials, has helped keep prices stable.

Market sentiment suggests a significantly higher likelihood of a Federal Reserve rate cut next month, with the CME FedWatch tool indicating an 83% chance, a sharp increase from 30% just a week ago.

This shift comes amid mixed economic signals. While the labor market continues to show resilience with a decrease in new unemployment claims, signaling low layoffs, it is struggling to create enough new jobs due to ongoing economic uncertainty.

Furthermore, US consumer confidence dropped in November as households expressed greater worry about job prospects and their financial future.

These data points followed a series of recent statements from Fed policymakers that were viewed as favorable to less restrictive monetary policy.

Morrison said:

Oil prices volatile

Oil prices were in the red after having climbed briefly earlier on Wednesday.

Prices have been under pressure due to the likelihood of a peace deal between Russia and Ukraine, which would pave the way for more oil into the market.

Prices began falling from their peak levels even before there was any indication of a successful negotiation to halt the Russian invasion of Ukraine.

Conversely, prices saw a temporary increase following the Trump administration's announcement of sanctions targeting two major Russian energy firms, Lukoil and Rosneft.

Encouraging news is now emerging from Ukraine, as President Volodymyr Zelensky has indicated his readiness to proceed with the peace plan proposed by the US.

Morrison said:

As far as supply and demand dynamics are concerned, the US Energy Information Administration will release its latest inventory update later today.

At the time of writing, the price of West Texas Intermediate crude oil was at $58 per barrel, down 0.2%, while Brent was largely flat at $61.84 a barrel.

Among base metals, the three-month copper contract was trading at $10,946.35 per ton, up 0.9%, while the aluminium contract was 1.8% higher at $$2,860.68 per ton.