Commodities
Gold rises with Fed pause in sight, copper rallies on China stimulus
© Reuters
Investing.com– Gold prices rose in Asian trade on Friday as markets bet that the Federal Reserve will keep rates on hold despite recent increases in inflation, while copper prices surged on more stimulus measures from major importer China.
Data released this week showed that U.S. and inflation rose more than expected through August. But the increases were insufficient in convincing traders that the Federal Reserve will hike rates further when it meets next week.
While gold benefited from this notion, further gains in the yellow metal were held back by a rally, as the greenback scaled six-month peaks on Thursday.
rose 0.3% to $1,916.80 an ounce, while expiring in December rose 0.3% to $1,938.35 an ounce by 00:48 ET (04:48 GMT). Both instruments were still set to close the week marginally lower.
Spot gold tests $1,900 support as dollar surges
Despite logging some gains in recent sessions, gold prices still remained under pressure from fears of higher U.S. interest rates. Spot gold prices came close to breaking below the $1,900 an ounce level on Thursday, before recovering its losses.
Strength in the dollar and was a key source of this pressure, as markets sought better yields in the greenback and government bonds.
While the Fed is next week, markets are also uncertain over what the bank’s outlook on rates will look like, considering the recent increases in inflation.
The central bank is widely expected to , with a rate cut being priced in only by mid-2024. Recent increases in inflation also raised the possibility of one more rate hike this year.
Rising interest rates bode poorly for gold, given that they increase the opportunity cost of investing in non-yielding assets. This trade, coupled with signs of resilience in the U.S. economy, have largely sapped demand for gold over the past year.
Copper rallies on China optimism, set for bumper week
Among industrial metals, copper prices rose to a 10-day high on Friday, buoyed chiefly by some positive economic readings and more stimulus measures from major importer China.
jumped 0.8% to $3.8492 a pound, and were also set for a 3.5% weekly gain.
Data on Friday showed Chinese and grew more than expected in August, showing some resilience in the world’s largest copper importer. Strength in industrial activity is expected to drive more demand for copper in the country.
The positive data came just a day after the People’s Bank of China cut reserve requirements for local banks, freeing up more liquidity to support a slowing economic recovery.
But other indicators showed that large swathes of China’s economy were still under pressure. – which represents capital spending by businesses- grew less than expected in August, while declined for a tenth straight month.
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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