Commodities
Gold prices steady as Fed fears ease, copper rises on China stimulus
© Reuters.
Investing.com– Gold prices were muted on Monday, but retained a bulk of last week’s gains as easing concerns over rising U.S. interest rates pulled down the dollar.
Industrial metals saw strong gains, with copper prices rising 0.6% to a 1-½ month high on the prospect of more stimulus measures in major importer China.
A weaker dollar helped commodity prices across the board, as a string of weak labor and inflation readings over the past week saw traders betting that the Federal Reserve was done raising interest rates.
This notion pushed the to an over two-month low, and also brought down Treasury yields.
Gold was a major beneficiary of this trade, with the yellow metal now once again coming within sight of the coveted $2,000 an ounce level. Gold prices rallied over 2% in the past week.
was flat at $1,982.49 an ounce, while expiring in December steadied at $1,984.85 an ounce by 00:17 ET (05:17 GMT).
Fed rate cuts in focus, meeting minutes awaited
Traders were now pricing in the possibility that the Fed could begin cutting interest rates by as soon as March 2024, although tool only showed a 30% chance of such a scenario.
Near-term, markets were focused squarely on the of the Fed’s late-October meeting, where the bank kept rates steady and signaled that it will likely keep rates higher for longer.
Still, the central bank is now almost unanimously expected to no longer raise interest rates, as weak inflation and labor data showed that the U.S. economy was cooling as expected.
But the prospect of rates remaining higher for longer bodes poorly for gold prices, given that high rates push up the opportunity cost of investing in bullion. This notion is expected to limit any major gains in gold over the coming months.
Copper rallies on China stimulus hopes
Copper prices rose to an over one-month high on Monday after Chinese officials vowed to roll out more policy support for the country’s beleaguered real estate sector, which is a key driver of copper demand.
jumped 0.6% to $3.7557 a pound- their highest level since early-October.
China’s central bank kept its benchmark at record lows, as it moved to foster a local economic recovery. The bank also injected about 80 billion yuan of liquidity into the economy, largely maintaining its pace of cash injections to support growth.
The move heralds some improvement in copper demand, especially if economic growth in the world’s largest copper importer picks up.
Investing.com — Oil prices settled lower Friday, ending the week with a loss as weaker U.S. nonfarm payrolls stoked concerns about an economic-led slowdown in crude demand.
At 2:30 p.m. ET (1430 GMT), the futures (WTI) traded fell 2.1% to settle at $67.67 a barrel, while contract fell 2.2% to $71.06 per barrel.
U.S. economic slowdown worries resurface after weak jobs report
The US economy added fewer jobs than anticipated in August, but rose from a sharply revised July figure, according to Labor Department data that could factor into the Federal Reserve’s next policy decisions.
Nonfarm payrolls came in at 142,000 last month, up from a downwardly-revised mark of 89,000 in July. Economists had called for a reading of 164,000, up from the initial July mark of 114,000.
Following the release, bets that the Fed will introduce a deeper 50 basis-point rate cut — rather than a shallower 25 basis-point reduction — increased.
Concerns about the demand come just a day after OPEC+ said it had agreed to postpone a planned increase in oil production for October and November.
U.S., Europe working on Iran sanctions
Geopolitical tensions ratcheted up on Friday after the U.S. and Europe they were working on sanctions to impose on Iran after the Tehran sent missiles to Russia.
The U.S. had previously warned Iran about transferring missiles to Russia, saying it would represent a major escalation in Iran’s support of Russia’s war against Ukraine.
(Reuters) – Goldman Sachs adjusted its expectations for OPEC+ oil production saying it now expects three months of production increases starting from December instead of October, the bank said in a note on Friday.
OPEC+ has agreed to delay a planned oil output increase for October and November, the producers group said on Thursday after crude prices hit their lowest in nine months, adding it could further pause or reverse the hikes if needed.
However Goldman Sachs maintained its range of $70-85 per barrel and a December 2025 Brent forecast at $74 per barrel.
The investment bank expects the effects of a modest reduction in OPEC+ supply in the upcoming months to be counterbalanced by easing effects from the current softness in China’s demand and faster-than-expected recovery of Libya’s supply.
“We still see the risks to our $70-85 range as skewed to the downside given high spare capacity, and downside risks to demand from weakness in China and potential trade tensions,” Goldman Sachs said.
Brent crude futures were down $1.63, or 2.24%, to $71.06 a barrel on Friday, their lowest level since December 2021. U.S. West Texas Intermediate crude futures fell $1.48 on Friday, or 2.14%, to $67.67, their lowest since June 2023. [O/R]
Investing.com — Strategists at Citi Research said oil prices could decline to around $60 per barrel by 2025, citing a significant market surplus as the primary driver.
While recent supply disruptions in Libya and a delayed production cut unwinding by OPEC+ have offered short-term support for Brent prices in the $70-72 range, Citi views this as temporary.
“At the time of writing, markets have not reacted to the OPEC+ decision, with Brent around flat to the 4 September close. Still, the Libyan situation could take months rather than a week to resolve, strategists wrote.
They highlight the likelihood of a strong market surplus emerging next year, pushing prices lower.
“We recommend selling on a bounce toward ~$80 Brent, as we look ahead to moves down to the $60 range in 2025 as a sizeable market surplus emerges,” the note states.
OPEC+ has delayed the start of its planned production cut unwind from October 2024 to December 2024, with the process now set to conclude by the end of 2025. This decision comes in response to recent market weakness and price declines, despite ongoing disruptions to Libyan oil supplies and broader economic concerns in the U.S. and China.
Separately, Bank of America’s Commodities Research team has revised down its price forecast to $75 per barrel for the second half of 2024, down from nearly $90, and for 2025, reduced from $80.
The team cites concerns about growing global oil inventories despite assuming OPEC+ will delay planned production increases. They note that weaker demand growth, combined with record OPEC+ spare capacity exceeding 5 million barrels per day, has dimmed the outlook for oil prices.
“In effect, we now see Brent oil prices moving from the top toward the middle of our unchanged $60-80/bbl medium-term range faster than previously warned,” BofA strategists said. This surplus in capacity, along with slower demand, also reduces the risk of price spikes from potential geopolitical disruptions.
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