Commodity wrap: Oil extends gains, while gold slips on Fed fears

Oil prices extended their gains from the previous session as geopolitical tensions in the Middle East remained high. 

Gold and silver prices slipped on expectations that inflation is likely to remain high, which may prompt central banks to keep interest rates higher for longer. 

Among base metals, the three-month copper contract on the London Metal Exchange fell nearly 1%, while aluminium was also sharply down from the previous close. 

The copper contract on the LME was at $13,877.30 per ton, while aluminium was down 1.9% at $3,690 per ton. 

Oil extends gains

Oil prices rose more than 1% on Wednesday, extending gains from the previous day, as fresh hostilities erupted in the Middle East and diplomatic efforts between Tehran and Washington showed limited progress.

At the time of writing, the Brent crude oil contract was at $97.14 per barrel, up 1.2%, while the West Texas Intermediate crude was at $94.96 a barrel, up 1.3%.

Iran fired ballistic missiles toward Kuwait and Bahrain, injuring dozens according to Kuwaiti officials, while US forces carried out strikes on Iran’s Qeshm Island. 

Although US President Donald Trump stated that negotiations with Iran are continuing, Iran’s semi-official Tasnim news agency reported that Tehran has not responded to the US in recent days and has suspended indirect talks until its conditions regarding Lebanon are met.

In a podcast interview released on Wednesday, Trump said Iran had agreed not to develop nuclear weapons and that Supreme Leader Ayatollah Mojtaba Khamenei was directly involved in the negotiations.

Tom Baker, Managing Director for Bahrain at commodities trader Vitol, warned at an energy conference on Tuesday that the global oil market was underpricing the risks stemming from the four-month-old  Iran conflict.

Sentiment was further supported by the International Energy Agency’s warning that global oil inventories could reach critical levels ahead of the peak summer demand season if current stock drawdowns persist.

US crude oil inventories fell for the seventh consecutive week, dropping by 6.8 million barrels in the week ended May 29, according to market sources citing American Petroleum Institute data.

Gold slips

Gold prices fell on Wednesday, pressured by expectations that persistent war-driven inflation will force central banks to keep interest rates higher for longer, as investors monitored Middle East developments and awaited key US economic data.

Although gold is traditionally viewed as a hedge against inflation, it becomes less attractive in a high-interest-rate environment because it pays no yield.

Adding to the pressure, oil prices rose while the US dollar index strengthened for a third consecutive session. 

A stronger dollar makes dollar-denominated gold more expensive for buyers using other currencies.

On Tuesday, new Federal Reserve Chairman Kevin Warsh vowed to uphold “the best of the Fed’s traditions” as he began his four-year term, while also signalling a fresh review of the central bank’s approach. 

Cleveland Fed President Beth Hammack reinforced a hawkish tone, stating that the US central bank may need to raise interest rates soon if elevated inflation pressures persist.

Markets are now turning their attention to Friday’s US nonfarm payrolls report for May, which will provide fresh clues on the Fed’s likely policy path.

The outlook was supported by the ADP private payrolls report, which showed stronger-than-expected job growth in May.

Gold remains technically weak, trading inside a downward parallel channel and below the 200‑period EMA on the 4‑hour chart, according to Haresh Menghani, editor at FXStreet. 

The relative strength index sits near 46, showing mildly negative momentum without oversold conditions, he added.

The MACD has slipped back below zero, reinforcing that stabilisation attempts are losing traction within the broader bearish structure.

At the time of writing, the COMEX gold contract was at $4,478.75 an ounce, down 0.9%, while silver was 2.2% down at $73.850 an ounce.