Commodity Roundup: Precious metals gain on softer dollar; oil up amid Middle East tensions

January 10, 2024

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stack of shiny gold bars 3d illustration — monsitj/iStock via Getty Images

The precious metals complex edged higher Wednesday as the U.S. dollar index (DXY) ticked lower, making greenback priced commodities more attractive for foreign currency holders, while market focus remained on the consumer and producer inflation print. Spot gold (XAUUSD:CUR) was up +0.28% to $2,035.25 an ounce by 6 am ET.

The data is expected to show that headline inflation rose 0.2% in December and 3.2% year-on-year. While gold is seen as a hedge against inflation, higher rates to tame rising price pressures weigh on the non-yielding asset’s appeal. “Gold follows the ebb and flow of the dollar with key support around $2,010 with a slump in ETF holding to a fresh four-year low weighing on prices,” Saxo Bank analyst Ole Hansen noted.

Oil prices on the other hand changed course to trade in green, as traders weighed economic growth concerns amid ongoing Middle East tensions, that could have a potential impact on supply from the region. After Tuesday’s API report, official U.S. inventory figures from the Department of Energy will be in focus at 1530 GMT to see if they show the same pattern of stock changes. Meanwhile, in its latest Short-Term Energy Outlook, the EIA raised its 2024 U.S. crude production forecast to an average of 13.2M bbl/day, with a further increase to 13.4M bbl/day in 2025, both records, citing increased well efficiency for the expected growth rigs.

Among base metals, copper prices held steady as investors awaited key economic data. Global economic growth, constrained by tight monetary policies, is expected to decelerate again in 2024, capping a five-year period that’s projected to be the weakest start to a decade since the 1990s, the World Bank said on Tuesday. The World Bank also forecast China’s economic growth – the leading importer of copper – to slow to 4.5% in 2024. China will release its trade data on Friday, which investors are keenly awaiting to gauge prospects for demand in the world’s biggest metals consumer.

Elsewhere among agriculture commodities, soybeans and wheat prices fell, while cocoa rose.