Commodity Roundup: Gold, silver suffer aggressive, but ‘healthy’ correction – Saxo Bank

1 week ago

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Gold prices (XAUUSD:CUR) extended their losses on Tuesday, after shedding more than 2% in the previous session to hit their biggest intraday fall in over a year, as improved risk appetite dampened its safe-haven appeal.

U.S. stocks rose on Monday after a market sell-off in the previous session, as tensions in the Middle East eased, and investors eyed a busy week for quarterly results from key companies that would provide a glimpse of the U.S. economy’s health.

Gold is often hailed as a hedge against inflation and geopolitical turmoil.

Gold’s aggressive rally since the mid-February low is currently being challenged with bullion suffering a long overdue and relatively aggressive, but healthy correction, Saxo Bank’s Ole Hansen said. This correction, he said, will help determine the real level of underlying demand.

Geopolitical tensions coupled with robust central bank buying had driven gold to a record intraday high of $2,448.80/oz on April 12; the front-month contract gold for April delivery posted a new record close on Friday at $2,398.40/oz.

Hansen further noted that, just like gold, silver is also going through a relatively aggressive correction, with the selling being amplified by its recent failure to break above $30 per ounce, the 2020 and 2021 high. “Having outperformed gold during the recent run-up, it is now retracing faster, as seen through the gold-silver ratio…”

Spot silver (XAGUSD:CUR) dropped 2.24% to $26.70 per ounce by 6:04 am ET.

However, geopolitical risks related to Russia/Ukraine and the Middle East, along with strong retail demand in China, remain positive factors for gold.

Oil prices meanwhile were mixed as traders awaited a new round of U.S. economic data. Recent manufacturing indicators have been positive, particularly in the United States, and investors are looking for signs of improvement outside the U.S.

Brent Crude (CO1:COM) futures rose +0.22% to $87.19 a barrel, while U.S. crude (CL1:COM) fell -1.00% to $82.02.

Elsewhere, Venezuela’s state-run oil company PDVSA plans to increase digital currency usage in its crude and fuel exports as the U.S. reimposes oil sanctions on the country, Reuters reported.

The move will make it more difficult for the country to increase oil output and exports, as companies will have to wait for individual U.S. authorizations to do business with Venezuela.

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