Commodities
Gold prices muted before inflation data, copper sinks on Zambia discovery
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Investing.com– Gold prices moved little in holiday-thinned Asian trade on Monday, with the yellow metal keeping to a trading range established over the past week as traders sought more cues from upcoming U.S. inflation data.
Among industrial metals, copper prices hit a near three-month low after KoBold Metals- a startup backed by Microsoft (NASDAQ:) founder Bill Gates, found a large copper deposit in Zambia that could form a major copper mine.
Waning expectations of early interest rate cuts by the Federal Reserve saw gold fall back into a $2,000 to $2,050 trading range in February, as markets began steadily pricing out chances of a rate cut in March and May.
A dearth of direct cues over the past week also gave gold few cues, with traders now looking to the upcoming consumer price index (CPI) data as the next big signal.
fell 0.1% to $2,023.48 an ounce, while expiring in April fell 0.1% to $2,037.20 an ounce by 00:07 ET (05:07 GMT). Trading volumes in the two were muted on account of market holidays in China, Hong Kong, South Korea and Japan.
CPI data, Fed signals in focus
Gold is expected to see little action ahead of U.S. on Tuesday. While the reading is expected to show that inflation eased further in January, price pressures are still expected to remain well above the Fed’s 2% annual target, giving the central bank more impetus to keep interest rates higher for longer.
Along with the inflation data, a sting of Fed officials, including , and are on tap this week.
Fed officials are expected to reiterate recent comments that the central bank is in no hurry to begin trimming interest rates. This notion had sparked steep losses in gold earlier in February, given that higher rates push up the opportunity cost of investing in the yellow metal.
The also remained in sight of a recent three-month high, keeping gold prices under pressure.
Still, gold managed to hold above the $2,000 an ounce support, although analysts cautioned that the level may be tested in the coming days.
Copper sinks on discovery of large deposit in Zambia
Copper prices fell on Monday, extending losses from the prior session on fears of a potential increase in global supplies.
expiring in March fell 0.4% to $3.6727 a pound- their weakest level since mid-November.
KoBold Metals, a start-up backed by Microsoft founder Bill Gates, said it had discovered a huge copper deposit in Zambia, which could potentially form one of the largest mines in the world.
Zambian President Hakainde Hichilema said that the deposit- found in the Mingomba Project- could produce between 500 to 600,000 metric tons of copper when operational. In comparison, Chile’s Escondida Mine- which is considered the world’s largest copper mine by production, produced about 1 million tons of copper in 2022.
The discovery points to a potential increase in copper supplies over the coming years- heralding more pressure on prices of the red metal, which usually benefit from tighter market conditions.
Copper was already nursing steep losses so far in 2024 amid persistent concerns over slowing demand in top importer China.
Commodities
Oil prices settle lower after weak August jobs report adds to demand concerns
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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.
Commodities
Goldman Sachs expects OPEC+ production increases to start in December
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(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]
Commodities
Citi, Bank of America see oil prices potentially going to $60
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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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