Commodities: Oil rebounds, gold plummets below $1200

Oil benchmarks began Asian trading in the green on Thursday following overnight losses as record March production data from Saudi Arabia and a rise in US inventories knocked the prices down by nearly 3% overnight.

At 07:25 BST on Thursday, the WTI front month futures contract was trading up 1.07% or 54 cents at $50.96 per barrel while Brent was trading up 0.94% or 52 cents at $56.07.

Earlier this week, Saudi Arabia said its output for March came in at a record high of 10.3 million barrels per day. Additionally, the US Department of Energy's weekly commercial inventories report indicated an increase of around 11 million barrels of crude to a record high of 482.4 million barrels. Both developments exasperated bearish sentiments in the market.

Meanwhile, gold slipped below $1200 an ounce for the first time down by -0.62% at $1195.60 in early trading on COMEX as the possibility of a June rate hike by the US Federal Reserve re-emerged driving treasury yields higher and dampening enthusiasm for precious metals.

Silver was also trading down 18 cents or 1.09% at $16.28 an ounce. Joshua Mahony, Market Analyst, IG said: “Gold has been heading south in today's trading following substantial strength in response to what seems like a near-term bottom around $1142 in March.”

“Given the more bullish signs in the market, this strength is likely to be short-term and $1200 is seen as a strong level of support which could bring on another bout of buying.”

Switching tack to oil, Mahony said, fears regarding a major increase in supply resulting from the proposed US-Iran deal have been quickly dispelled as 'wide of the mark' given the fact that the deal is far from being implemented and even then, the underinvestment in Iranian oil means it would take up to a year for any serious volume to be hitting the markets.

“However, with today's US oil inventories announcement of a 14-year high comes the obligatory selloff, with WTI being hit hardest,” he added.

Meanwhile, three-month LME copper contract ended Wednesday down 1.6% at $5991.00 per metric tonne. Elsewhere, CBOT Corn and Wheat contract were in the red, as was the ICE Cotton contract, while ICE Cocoa contract was trading in the green.