Commodity wrap: gold flat, oil set for second weekly decline, base metals in green

Gold prices eased and remained flat on Friday due to a stronger dollar against a basket of major currencies.

Meanwhile, silver climbed more than 1% on robust industrial demand, with prices outperforming gold comfortably.

Oil prices ticked up on Friday on concerns over lower supply from Venezuela. But prices are set for a second consecutive weekly decline.

Additionally, base metals were in the green with copper prices approaching recent record highs.

Gold flat, silver surges

Gold prices were set to finish the week higher after soft US inflation figures fueled expectations for interest rate cuts.

However, prices eased on Friday due to a strengthening dollar and investors adjusting positions at the close of the year.

The increase in the dollar to a more than one-week high has raised the cost of dollar-denominated bullion for those holding other currencies.

At the time of writing, the COMEX gold contract was at $4,357.45 per ounce, down 0.2%, while silver prices were 1% higher at $65.940 per ounce.

Silver's 128% year-to-date gain, driven by stronger industrial demand, has outpaced gold's 65% annual rise so far this year.

US consumer prices in November increased by 2.7% year-on-year, a rise that was lower than the 3.1% forecast by economists.

Following this softer-than-expected inflation data, Federal Reserve Bank of Chicago President Austan Goolsbee stated on Thursday that sustained moderate inflation could pave the way for additional interest rate cuts next year.

The release of the data led to federal funds rate futures indicating a marginally higher likelihood of the US Fed implementing a rate cut during its January meeting.

Goldman Sachs projects a 14% increase in gold prices, reaching $4,900 per ounce by December 2026.

This forecast, outlined in a Thursday note, is primarily supported by sustained high central bank demand and expected cyclical support from Fed interest rate cuts.

Conversely, elevated gold prices are currently impacting demand in major consumer markets.

In India, discounts on gold have widened to their highest level in over a month due to suppressed wedding-season buying, while in China, markdowns have hit their steepest point since late August 2020.

Oil set for weekly decline

Despite a potential supply glut and the prospect of a Russia-Ukraine peace deal limiting upward movement, oil prices moved slightly higher on Friday.

However, concerns regarding disruptions from a blockade of Venezuelan oil tankers meant prices were still on track for a second consecutive weekly decline.

A significant global oversupply of oil is widely anticipated by analysts next year, driven by higher production from the OPEC+ coalition, the US, and other oil-producing nations.

At the time of writing, the price of West Texas Intermediate crude oil was at $56.38 per barrel, up 0.7%, while Brent was at $60.19 per barrel, up 0.6%.

Geopolitical risk premiums were moderated by uncertainty regarding how the US would implement President Donald Trump's stated goal of preventing sanctioned tankers from entering or leaving Venezuela, according to IG analyst Tony Sycamore on Friday.

Venezuela has authorised two previously unsanctioned oil cargoes to depart for China, according to Reuters.

This action was taken on Thursday by the nation, which is responsible for approximately 1% of the world's oil supply.

Base metals

Base metals started the day on a generally positive note. However, the recent gradual increase in prices has been accompanied by very low trading volumes.

This trend of light volumes has continued in recent sessions as the market approaches the holiday break, Neil Welsh, head of metals at FCA-regulated multi-asset brokerage Britannia Global Markets, said in an emailed commentary.

Copper prices climbed on Friday, moving within $25 of the all-time high, following another optimistic prediction from Goldman Sachs that emphasised limitations in mine supply.

Benchmark three-month copper on the London Metal Exchange was up 1.3% at $11,876.85 per ton. It hit a session-high of $11,933, within striking distance of the all-time peak of $11,952 recorded last week.

“Copper is consolidating just below recent record highs after a powerful rally this year, driven by disrupted mine supply, stockpiling and its central role in electrification and grid investment, while major producers continue to stress that constrained project pipelines and lower grades make it hard to ease the current tightness quickly,” Welsh said.

Goldman Sachs reaffirmed its long-term optimism for copper, maintaining its 2035 price forecast of $15,000 per ton.

In a Thursday note, the firm highlighted the metal as its top long-run industrial choice due to exceptional mine supply limitations and robust structural demand growth.

At the time of writing, the three-month aluminium contract on LME was at $2,952.10 per ton, up 1.2%, while the zinc contract was at $3,079.20 per ton, up 0.5%.