Commodity wrap: oil and gold flat, while silver plunges ahead of Fed decision

Oil prices were steady on Thursday as Ukrainian attacks on Russian oil assets raised concerns over lower supply among investors.

Meanwhile, gold prices edged lower with stronger equities limiting safe-haven appeal for the yellow metal. However, prices rebounded and were slightly higher at the time of writing.

On the other hand, silver prices fell sharply as volatility continued ahead of next week’s US Federal Reserve monetary policy decision.

Oil flat

Oil prices were flat on Thursday after spending most of the day higher.

Prices climbed on Thursday due to the market's attention on Ukrainian assaults against Russian oil facilities, alongside the dampening of hopes for a deal that would reinstate Russian oil supplies because of stalled peace negotiations.

Ukrainian military intelligence reported on Wednesday that Ukraine had struck the Druzhba oil pipeline in Russia's central Tambov region.

This marks the fifth attack on the pipeline, which is a key route for Russian oil destined for Hungary and Slovakia.

Despite the reported attack, both the pipeline operator and Hungary's oil and gas company later confirmed that oil supplies were flowing through the pipeline as usual.

Prices were also bolstered by the lack of progress on a Ukraine peace plan.

This perception followed talks between US President Donald Trump's representatives and the Kremlin, which failed to yield specific breakthroughs on ending the war.

Traders had previously driven prices down based on the expectation of a war resolution, anticipating that a deal would reintroduce Russian oil into an already saturated global market.

“However, geopolitical developments helped offset the bearish supply narrative,” said David Morrison, senior market analyst at Trade Nation.

President Trump noted that talks between his envoy, Steve Witkoff, and President Putin were “reasonably good”.

Gold steady

Gold started the week strongly, reaching $4,265, its highest price since October 21. This rally followed the post-record lows seen at the end of October.

However, in contrast to the consistent, gradual ascent to all-time highs observed throughout September and early October, the recent daily price movement has been notably more volatile and less certain.

Global shares saw a slight uptick on Thursday, driven by the anticipation of a US interest rate cut next week.

This expectation stems from recent data indicating a slowdown in employment, suggesting the rate cut will provide support to the world's largest economy.

Meanwhile, new applications for US unemployment benefits fell last week to their lowest level in over three years, signaling continued strength in the labor market.

According to the US Labor Department's report on Thursday, initial claims for state unemployment benefits dropped by 27,000 to a seasonally adjusted 191,000 for the week ending November 29.

This is the lowest figure recorded since September 2022 and came in below the 220,000 claims economists surveyed by Reuters had anticipated.

The labor market continues to be characterised by a "no fire, no hire" pattern, according to economists.

Next week, Fed officials will convene to make a decision on interest rates.

Within the central bank's rate-setting Federal Open Market Committee, three core members of the Washington-based Board of Governors favor cutting rates.

However, as many as five of the 12 voting policymakers have expressed opposition to or skepticism about any further rate reduction.

At the time of writing, the COMEX gold contract was at $4,229.90 per ounce, largely steady from the previous close.

Silver

Despite hitting a new all-time high on Wednesday, silver quickly reversed course. Soon after the European open, it dropped sharply by 4%, settling at $56.62.

“This was another demonstration of the kind of volatility one can expect when silver gets going,” Morrison said.

Silver prices will likely need a further correction to establish a base for a renewed upward move, as the daily MACD has slightly retreated from overbought territory.

Despite the shorter-term MACDs indicating that silver is oversold, there is a possibility of a price bounce, according to Morrison.

At the time of writing, the COMEX silver contract was at $57.353 per ounce, down 2.1% from the previous close.