Commodity wrap: profit-booking sinks gold, silver; geopolitical risk drives oil higher

Precious metals fell sharply on Monday as investors resorted to booking profits after steep gains in the last few weeks. 

Silver and platinum dropped after hitting record highs earlier in the session. 

Gold prices also fell more than 5% as the yellow metal fell below the $4,500 per ounce level. 

Meanwhile, oil prices jumped more than 2% on concerns over lower supply from the Middle East. 

Gold and silver plunge

At the time of writing, the COMEX gold contract was at $4,355.75 per ounce, down 4.3%.

Silver prices were down a whopping 7.2% at $71.590 per ounce. The contract had hit a record high of $82.615 an ounce earlier in the day. 

Meanwhile, platinum experienced a 12% decline to $2,157.09 per ounce, having earlier reached a record high of $2,478.50 during the trading session.

This year has seen a significant rally in precious metals. 

Gold has climbed by approximately 65%, while both platinum and palladium are also set for annual gains. 

Silver, however, has been the top performer, achieving a remarkable 150% gain.

This exceptional performance is fueled by its designation as a critical mineral, ongoing supply shortages, and increasing industrial and investor demand.

On Sunday, US President Donald Trump indicated that he and Ukrainian President Volodymyr Zelenskiy were approaching an agreement to conclude the conflict in Ukraine. 

Later on Monday, Trump is also scheduled to meet with Israeli Prime Minister Benjamin Netanyahu to press for advances on the currently stalled Gaza ceasefire.

As a traditional safe-haven asset, gold tends to perform well when economic or geopolitical uncertainty is high.

Additionally, the non-yielding asset thrives in environments characterised by low interest rates.

Investors are currently anticipating two rate cuts next year, with market expectations focusing on the upcoming release of the Fed’s December meeting minutes on Tuesday for additional clarity on its policy direction.

Oil climbs on geopolitical tensions

Oil prices jumped on Monday on potential disruptions in oil supply from the Middle East. 

At the time of writing, the price of West Texas Intermediate crude oil was at $58 per barrel, up 2.3%, while Brent was 2% higher at $61.44 a barrel. 

Both oil benchmarks had fallen more than 2% on Friday.

Oil prices rose, driven by heightened Middle East tensions that increase the risk of supply disruptions. 

This includes Saudi Arabia’s reported airstrikes in Yemen and Iran’s provocative rhetoric, which said that it is in a “full-fledged war” with the US, Europe, and Israel.

The Middle East sits on more than half of the world’s total oil reserves.  

Meanwhile, Saudi Arabia, the world's leading oil exporter, is expected to lower the price of its main Arab Light crude for its Asian customers in February. 

This move would mark the third consecutive monthly decline, further reducing the price from the January premium of 60 cents a barrel, which was already at a five-year low. 

According to a Reuters survey of six Asia-based refining sources, the anticipated reduction is driven by declines in the spot market, indicating ample crude supplies.