Commodity wrap: gold jumps on safe-haven demand; oil supply fears escalate

The dollar's pause and escalating Middle East tensions spurred investor interest in safe-haven assets, leading to a 2% jump in gold prices on Wednesday. 

This rebound follows the precious metal's decline to its lowest point in over a week during the preceding session.

Silver prices also rebounded, tracking gold’s rise on Wednesday. 

Meanwhile, oil prices remained volatile throughout the day. Initially, prices had risen 3% before briefly falling. At the time of writing, the West Texas Intermediate crude oil and Brent crude were slightly lower. 

Gold gains on safe-haven demand

Following the outbreak of hostilities between Iran and a US-Israeli coalition, gold surged past $5,400 on Monday morning, driven by safe-haven buying. 

However, the price retreated slightly for the rest of Monday's session before stabilising and briefly recovering toward $5,400 during the subsequent Asian Pacific session. 

This upward movement was short-lived, as the price then experienced a sharp decline, collapsing by about 7% and breaking below the $5,000 mark early yesterday afternoon.

On Wednesday, prices on COMEX were 1% higher as safe-haven demand returned due to ongoing tensions in the Middle East. 

Gold has been steadily rising and is now targeting the $5,200 level. This price point was a key area of consolidation for gold in the previous month.

“So, it will be interesting to see if it can hold around this level as the situation across the Middle East unfolds,” said David Morrison, senior market analyst at Trade Nation. 

Silver prices briefly plunged below $78 per ounce on Tuesday. Prices have since regained some ground and were trading around $85 an ounce. 

“In the bigger picture, there is some support around $80, but a prolonged break below here increases the risk of a deeper pullback,” Morrison said. 

“On the other hand, the bulls will be pushing for a break above $90.”

Oil slips

Crude oil has had a strange day so far. Prices initially rose more than 3%, before slipping slightly on Tuesday. 

Oil prices, although paring earlier gains, remained near multi-month highs on Wednesday. 

This was due to the disruption of Middle East energy flows caused by the US-Israeli conflict with Iran. However, the upward pressure eased following a report that Iranian operatives were seeking discussions with the US to resolve the conflict.

Operatives from Iran's Ministry of Intelligence have signaled to the US Central Intelligence Agency (CIA) that they are open to discussions aimed at ending the war, according to officials briefed on the matter who were cited by The New York Times.

The price of WTI was last at $74 per barrel, down 0.8%, while Brent was down 0.7% at $81 a barrel. 

The US remains committed to the conflict with Iran, with Defense Secretary Pete Hegseth stating on Wednesday that the US is currently "winning" and prepared to engage militarily "as long as needed." 

The ongoing conflict has seen US and Israeli forces launch attacks across Iran, which has prompted retaliatory Iranian strikes targeting critical energy infrastructure. This region is vital to the global economy, producing nearly a third of the world's oil.

Due to limitations in storage and the lack of an export route, Iraq, OPEC's second-largest crude producer, has reduced its oil output by almost 1.5 million barrels per day, according to officials speaking to Reuters.

These officials warned that Iraq might be forced to halt nearly 3 million bpd of production within days if exports do not recommence.

Adding to the regional tension, Iran has also been targeting tankers in the Strait of Hormuz. This vital waterway, which typically handles about 20% of the world's oil and liquefied natural gas traffic, is currently experiencing an effective shutdown of transit.

President Donald Trump stated that the US Navy was prepared to escort oil tankers through the Strait if the situation demanded it. 

He also announced that he had instructed the US International Development Finance Corporation to offer financial guarantees and political risk insurance for maritime commerce within the Gulf region.