Commodities: Gold slips, oil markets weakness persists

Bearish trends show no immediate signs of dissipating from the wider commodities market, as gold registered a second straight monthly decline and its third consecutive quarterly decline on Tuesday.

The wider commodities market slump and a stronger dollar continued to hound the precious metal overnight. US gold for April delivery settled down $1.70 at $1,184.80 an ounce at 19:15 on Tuesday. Spot markets failed to fire up as well, with traders in Dubai reportedly pitching trades down 0.2% at $1,185.70.

Despite the deadline for the Iranian nuclear settlement having been missed, oil markets continue to factor in the prospect of the country’s crude flooding the market. In a note to clients, Societe Generale commodities analyst Michael Wittner said the talks had a "70% chance of success and we estimate Brent would drop $5 on the news".

At 07:17 on Wednesday, Brent was trading down 0.58% or 32 cents at $54.79 per barrel, while the WTI was down 0.63% or 30 cents at $47.30 per barrel in Asian trading.

Alastair McCaig, Market Analyst at IG, noted: “In tandem with the dollar strengthening, both oil benchmarks have been squeezed a little lower. In conjunction with the currency pressure, the ongoing talks surrounding Iran’s emergence from the sanctions wilderness has added another dimension to the imbalance of oil’s supply to demand.”

“Last week’s intraday move above both the 50- and 100-day moving averages has seen gold suffer the same fate as Icarus, with the move alerting the goldbears to the precious metal’s efforts to move into overbought territory.”

Elsewhere, copper faired a little better overnight but uncertainty persists with some in the City opining that the so-called “mini-rally” may have run out of steam.

Overnight three-month copper was down 28 cents or 0.5% at $6075.00 per metric tonne. Overall, there is no escaping the fact that commodities have maintained their status as the world’s worst performing asset class as the first quarter of 2015 comes to a close, said Grant Sporre, research analyst at Deutsche Bank.

“Of the risk factor strategies, we believe short volatility will be the best performer over the coming year. We also believe the volume risk premium remains richest in the energy sector. Furthermore, supply discipline continues to be absent across the bulk commodities sector,” he added.