Commodity wrap: gold, silver tumble as rate cut bets fade; oil slips 3%

Gold and oil prices tumbled on Thursday in a volatile session as traders assess geopolitical tensions and positive economic data. 

Gold prices slipped more than 2% and silver plunged 7% as stronger US employment data prompts traders to push back expectations for an early Federal Reserve (Fed) interest rate cut.

Oil prices plunged by nearly 3% on Thursday as investors prioritised the International Energy Agency's lowered global oil demand forecast for 2026 over the diminished threat of US attacks on Iran.

Base metals prices also fell as rate cut bets faded with strong US economic data in focus. 

Gold and silver tumble 

Gold prices on COMEX last traded at $4,970.70 per ounce, down 2.5%, while silver was at $76.368 per ounce, down 9.1% from the previous close. 

Data released on Wednesday by the US Bureau of Labor Statistics (BLS) showed an unexpected pickup in job growth in the US economy. 

US nonfarm payrolls (NFP) rose by 130,000 in January, well above expectations of 70,000 and marking the strongest monthly job gain since December 2024. At the same time, the unemployment rate edged lower to 4.3% from 4.4%.

Meanwhile, on Friday, the initial jobless claims report indicated that 227,000 Americans filed for unemployment benefits in a week, compared to analyst forecast of 222,000.

“The stronger labour data reduces the scope for near-term monetary policy easing, reinforcing expectations that the Fed is likely to remain on hold over the next couple of meetings,” Vishal Chaturvedi, editor at FXStreet, said in a report. 

Fresh comments from Federal Reserve officials were absorbed by traders on Wednesday. 

Specifically, Kansas City Fed President Jeffrey Schmid stated that he believes monetary policy should remain restrictive since inflation is still near 3%, and suggested that additional rate cuts could lead to inflation staying elevated for a longer period.

Despite market expectations, which are still pricing in nearly 50 basis points of easing this year, attention is now focused on the upcoming US Consumer Price Index (CPI) release on Friday. 

The CME FedWatch Tool currently indicates the most probable window for the first rate cut is June-July.

Chaturvedi added:

Oil slumps

Oil prices slipped nearly 3% on Thursday as concerns about lower demand gripped the market. 

The International Energy Agency (IEA) announced on Thursday that it now anticipates a slower increase in global oil demand for the current year. 

This projection comes alongside a forecast for a significant supply surplus, even considering the production disruptions that occurred in January.

The agency's monthly oil report estimates that the global oil surplus will remain largely consistent with last month's projection, foreseeing supply exceeding demand by 3.73 million barrels per day in 2026. 

This forecasted surplus is substantial, representing nearly 4% of world demand and is higher than projections from other sources.

"Escalating geopolitical tensions, snowstorms and extreme temperatures in North America, and Kazakh supply disruptions sparked the reversal to a bullish market," said the IEA.

Following the release of the IEA's monthly report, the Brent and WTI oil benchmarks reversed their earlier gains, which had been supported by worries about the US-Iran tensions, and traded in negative territory.

Following talks with Israeli Prime Minister Benjamin Netanyahu on Wednesday, US President Donald Trump stated that a definitive agreement on the path forward with Iran has not yet been reached, though negotiations with Tehran are set to continue.

This follows Trump's statement on Tuesday that he was considering deploying a second aircraft carrier to the Middle East if a deal with Iran is not secured.

The next round of negotiations has not yet had its date or location announced.

Early price gains were also limited by a substantial increase in US crude inventories. 

According to the Energy Information Administration, US crude inventories unexpectedly rose by 8.5 million barrels last week, reaching 428.8 million barrels. 

This build significantly surpassed the 793,000-barrel increase anticipated by analysts in a Reuters poll.