Commodity wrap: bullion up on rate-cut bets, while oil climbs on supply fears

Gold prices rose on Wednesday as traders anticipated another interest rate cut by the US Federal Reserve later this month. 

Silver eased from its record highs of more than $59 per ounce earlier in the day. But prices were still slightly higher than the previous close. 

Oil prices climbed as Russia said talks with the US in Moscow failed to reach a compromise regarding a potential peace deal with Ukraine. 

Copper prices breached the $11,400 per ton mark on Wednesday as supply tightness continued to boost sentiments. 

Gold climbs

Gold prices moved higher after the release of the US ADP National Employment Report earlier on Wednesday. 

Private companies in the US shed 32,000 workers, payroll processing firm ADP reported on Wednesday, indicating a further slowdown in the labour market. 

Concerns about the domestic job market intensified as ADP reported a decline in payrolls that was much worse than expected. 

This drop represents a significant deterioration from October's upwardly revised gain of 47,000 positions, sharply missing the Dow Jones consensus estimate of a 40,000 increase.

The data is likely to pave the way for the US Fed to cut interest rates at its meeting later this month. 

Lower interest rates bode well for non-yielding commodities such as gold and silver. 

Silver reached a new all-time high, breaching $59 per ounce for the first time ever. 

However, the market's significant volatility continues to pose a challenge for traders looking to capitalise on the rally. 

Intra-day ranges of 200 to 300 ticks are now common, making the commodity feel more akin to a volatile "meme stock" than a traditional commodity trade, according to Trade Market’s senior market analyst David Morrison.

Oil rises

Russia announced that discussions with US officials in Moscow were unsuccessful in brokering a compromise for a potential Ukraine peace agreement, which could have led to a relaxation of sanctions on Russia's oil industry.

At the time of writing, the price of West Texas Intermediate crude oil was at $59.09 per barrel, up 0.8%, while Brent was at $62.86 a barrel, up 0.7%. 

Following a five-hour meeting between Russian President Vladimir Putin and top US envoys, the Russian government announced on Wednesday that the two sides failed to reach a compromise.

Oil markets are currently focused on the outcome of these talks, as a potential agreement could result in the lifting of sanctions on significant Russian oil companies like Rosneft and Lukoil. 

The removal of these sanctions would, in turn, free up the restricted oil supply.

On Tuesday, Putin claimed that European powers are obstructing US efforts to broker a peace agreement.

He asserted that their proposed solutions were intentionally crafted to be "absolutely unacceptable" to Moscow.

The war's broader geopolitical implications have recently been underscored by Ukrainian assaults targeting Russian oil export infrastructure along the Black Sea coast.

Analysts say geopolitical risks have increased following recent events, including Ukraine's strikes on two sanctioned Russian oil tankers in the Black Sea last week. 

Adding to these concerns, President Putin stated on Tuesday that Russia would take action against tankers from countries assisting Ukraine.

“Chart-wise, crude continues to trade sideways, with a slight downside bias,” Morrison said. 

Copper 

“Copper and the other base metals are trading higher this morning as the market digests a mix of seasonal Chinese softness and persistent physical tightness that keeps the upside story intact,” Neil Welsh, head of metals at FCA-regulated multi-asset brokerage Britannia Global Markets, said in an emailed commentary. 

The softening demand from Chinese fabricators as winter approaches has lessened immediate import pressure and led to a lower Yangshan premium. 

Despite this near-term relief, discussions at the Shanghai conference and ongoing negotiations between smelters and miners emphasise that stress regarding raw material supply remains a fundamental, structural concern.

The immediate tightness in cathode markets will not be entirely relieved by new supply sources, such as the upcoming Kamoa Kakula smelter in the Democratic Republic of the Congo, though it will offer assistance in the longer term.

At the time of writing, the three-month copper contract on the London Metal Exchange was at $11,462 per ton, up 2.5% from the previous close. The contract had hit a record high of $11,486.95 per ton.