Commodities: Oil continues recovery run, gold slips in European trading

Gold declined for a second successive session on Thursday, while base metals rose and oil extended its recovery run.

Much of the precious metals market was in negative territory, but the yellow metal slipped the most in European trading. At 1633 BST, COMEX gold for December delivery was down 0.94% or $10.60 at $1,123 an ounce, while spot gold was down 0.84% or $9.57 at $1,124.48 an ounce.

COMEX silver was down 0.39% or six cents at $14.61 an ounce, while spot platinum was 0.18% or $1.83 lower at $1,012.82 an ounce.

Liz Grant, senior account executive at Sucden financial, attributed much of the decline to receding safe haven demand and a stronger dollar. “The rally in stock markets and the stronger dollar weighed on precious metals, taking gold back to 1120/25 with silver still struggling to clear $15.”

“Decreasing expectation of US interest rate hikes will probably prove supportive but looking forward we see no real incentive for significantly higher prices and expect gold to remain range bound between the technical areas of $1,150-1,220 an ounce.”

With the Chinese markets closed for two days of public holidays to commemorate World War II, trading turnover was light across the London Metal Exchange complex but base metals continued to firm up.

Past the midway point of trading on the LME, all major futures were trading higher. Three-month delivery contracts of primary aluminium (up 2.3%), copper (up 2.9%), lead (up 0.1%), nickel (up 0.8%), tin (up 0.7%) and zinc (up 0.9%) were all in positive territory.

Meanwhile, oil benchmarks saw a much calmer trading session in complete contrast to the volatility of recent trading sessions. At 1634 BST, the Brent front month futures contract was up 1.35% or 68 cents to $51.18 per barrel, while the WTI was up 2.21% or $1.02 at $47.27 per barrel, despite US inventories having risen 4.7m oil barrels last week.

Analysts at Barclays have maintained their expectation for continued oil price appreciation in the balance of the year, but acknowledged “several downside risks” related to OPEC and non-OPEC supplies, as well as China’s growth pattern.

Finally, major agricultural commodities futures conveyed a mixed picture. CBOT corn (down 1.43%) and wheat (down 2.30%) futures continued to grapple with healthy crop outlooks. However, ICE cocoa (up 0.16%), cotton (up 0.30%) and CME live cattle (up 0.80%) contracts were all trading up.