Commodities
Gold prices steady with PCE test in focus, copper slips on weak China PMIs
Investing.com– Gold prices steadied in Asian trade on Friday, with traders remaining wary of the yellow metal before key U.S. inflation data that is likely to factor into the outlook for interest rates.
Among industrial metals, copper prices slipped tracking weaker-than-expected purchasing managers index data from top importer China.
Metal markets saw some relief on Friday after the slid from over two-week highs in overnight trade, tracking weak figures. But this relief was limited, as fears of sticky inflation and high interest rates persisted before key inflation data.
steadied at $2,342.86 an ounce, while expiring in August fell 0.1% to $2,363.80 an ounce by 00:19 ET (04:19 GMT). The yellow metal was still set to gain about 2.6% in May, after it shot up to record highs earlier in the month.
Gold trims May gains, PCE test looms
But gold was now trading about $100 below its May record highs, as fears of high-for-longer U.S. interest rates sparked some profit-taking in the yellow metal.
A string of Federal Reserve officials warned in recent weeks that the central bank had little confidence to begin trimming interest rates, amid sticky inflation.
This put data- which is the Fed’s preferred inflation gauge- squarely in focus. The reading is due later on Friday and is expected to show inflation cooled slightly in April but remained well above the Fed’s 2% annual target range.
High-for-longer interest rates bode poorly for gold and other precious metals, given that they push up the opportunity cost of investing in the space.
Platinum, silver set for bumper gains in May
Other precious metals sank on Friday, also seeing a measure of profit-taking after strong gains through May. fell 0.6% to $1,028.95 an ounce, while slid 1.6% to $31.030 an ounce. But the two metals were up 9% and 17%, respectively, in May, as they benefited from exposure to a speculative frenzy that drove up the prices of industrial metals.
Both platinum and silver have some industrial applications.
Copper prices sink on weak China PMIs
Benchmark on the London Metal Exchange steadied at $10,141.0 a tonne, while one-month fell 0.5% to $4.6350 a pound.
Both contracts wiped out a bulk of their gains through May despite hitting record highs, as a speculative frenzy died down and gave way to severe profit-taking.
Sentiment towards copper was also dented by weaker-than-expected PMI data from top copper importer China. China’s unexpectedly contracted in May, while grew at a slower pace.
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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