Commodity wrap: Gold rebounds; oil slips 3% on hope of US-Iran deal

Gold prices on COMEX rebounded more than 2% on Friday after plunging to a seven-month low earlier this week. 

Oil prices fell nearly 3% as the market hoped for an imminent peace deal between the US and Iran, which could free up supplies from the Strait of Hormuz. 

Meanwhile, among base metals, the three-month copper contract on the London Metal Exchange rose 1.1% to $13.637.47 per ton, while the aluminium contract was at $3,522.15 per ton, up 0.2% from the previous close. 

For the oil market and also for the base metals markets, China’s May production data will be of interest next week, according to Commerzbank AG analysts.

Metal production is expected to keep expanding, particularly in aluminum output.

The first release will highlight this trend, with aluminum production showing the strongest increase among the major metals.

“A new record in production could deal a further blow to the price rally in the aluminum market, which has already stalled recently,” Barbara Lambrecht, commodity analyst at Commerzbank, said. 

Gold rebounds, but set for weekly loss

Gold was on track for a second consecutive weekly decline on Friday as expectations of higher interest rates continued to weigh on the non‑yielding metal ahead of next week’s Federal Reserve meeting.

At the time of writing, the COMEX gold contract was at $4,201.22 per ounce, up 2.1%, while silver was at $66.490 an ounce, up 3.9%.

Oil prices slipped more than 2% after a Western source told Reuters that a memorandum between the United States and Iran to halt the Gulf war could be signed as soon as Sunday, with Geneva emerging as the likely venue. 

Gold has been under pressure since the conflict began in late February, as oil‑driven inflation raised concerns that central banks would keep rates elevated.

While investors often view gold as an inflation hedge, higher interest rates typically erode its appeal.

Traders are currently pricing in a 58% probability of a US rate hike by December, according to CME Group’s FedWatch tool. 

Data this week showed US producer prices rose more than expected in May, while consumer inflation jumped above 4%, adding to the case for tighter policy.

Attention is now turning to the Fed’s June 16–17 meeting, the first chaired by Kevin Warsh, where markets expect rates to remain unchanged.

Meanwhile, in a sign of broader market pressures, Rolex raised global prices of its gold watches by an average of 5% this month, marking a rare second annual increase across key markets including Britain, Hong Kong, and the United States, according to luxury research platforms and dealers.

Oil slips

Oil prices fell sharply on Friday as investors grew hopeful that a deal to end the US–Iran war was close, even though Washington and Tehran offered conflicting accounts of what a draft agreement contained.

The price of West Texas Intermediate was last at $85.39 a barrel, down 2.8%, while Brent was 2.7% lower at $87.98 a barrel.

Crude dropped about 5% at the session low after President Donald Trump said Thursday the US had “made a great settlement of the war with Iran” that could be signed within days. 

Prices later rebounded somewhat after Trump dismissed terms published by Iranian media, insisting they had “nothing to do” with what was agreed in writing.

He accused Tehran of negotiating in bad faith, calling Iranians “very dishonorable people to deal with” and warning, “They better get their act together, and FAST!” in a Truth Social post.

Iran’s state news agency Mehrs released a 14‑point document claiming the US had agreed to withdraw forces from around Iran, lift its naval blockade within 30 days, and provide $300 billion in reconstruction funds. 

In return, Iran would reopen the Strait of Hormuz under arrangements set by Tehran.

Despite the heightened rhetoric, analysts said oil prices have remained relatively contained.

BMO Capital Markets noted that alternative shipping routes around the Strait, ongoing diplomatic efforts, and weaker Chinese crude imports have helped offset geopolitical risks. 

Citi echoed that view, highlighting that China’s reduced demand has eased fears of a bidding war for supplies.

The bank estimated China could sustain imports near 8.7 million barrels per day without significantly depleting inventories, suggesting demand from Asia may not provide a major boost to prices in the near term.

The combination of diplomatic uncertainty, muted Chinese demand, and alternative supply channels has kept oil markets from spiraling higher, even as hostilities between Washington and Tehran continue.