Commodity Roundup: Oil set for first monthly gain in four; silver, gold eye Powell speech

January 31, 2024

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Oil prices fell on Wednesday, with the U.S. West Texas Intermediate crude futures contract down more than 1% as investors weighed the impact on demand from China economic concerns, and escalating tensions in the Middle East.

“Oil prices remain choppy ahead of month end as the geopolitical risk premium ebbs and flows,” Saxo Bank’s Ole Hansen wrote, while noting that Saudi Aramco’s move to drop expansion plans as the demand outlook is being questioned, potentially a decision that may keep prices supported for longer.

In the precious metals complex, gold prices rose despite a stronger dollar, while gains remained capped by investors cautiously awaiting the U.S. Federal Reserve’s policy decision and Chairman Powell’s press conference in particular for hints on how soon the central bank could begin easing rates. Bullion (XAUUSD:CUR) faces first monthly fall in four, down 1.4%, while up +0.03% to $2,036.75 on the day, by 6 am ET.

The implied probability of a March rate cut has been pared back from above 70% at the start of the year to roughly 44%, according to the CME FedWatch tool.

Meanwhile the World Gold Council said, global gold demand excluding over-the-counter trading fell by 5% to 4,448.4 metric tons in 2023 but remained strong compared with a 10-year average due to geopolitical and economic uncertainty, Reuters reported.

Silver prices however ticked lower, heading for a second consecutive monthly loss, as investors weigh economic indicators against the Fed’s policy direction.

Among base metals, London copper prices slipped with China’s soft industrial data weighing on sentiment. China’s manufacturing activity contracted for the fourth straight month in January, an official factory survey showed on Wednesday. Copper futures (HG1:COM) were however, up for a third straight month on stimulus support.

Elsewhere, soybean, cocoa and wheat futures fell. ING reported that cocoa futures trading in New York extended the upward rally for a third straight session yesterday as Harmattan winds in West Africa and lower port arrivals in major producing countries continue to pose a threat to next season’s production. “Weekly data from the European Commission show that soft wheat shipments from the EU reached 18.2mt as of 28 January, down 5% compared to 19.2mt for the same period last year,” the report added.