Commodities: Oil sees modest gains, gold back below $1200

Oil markets saw modest movements to the upside while gold slipped back below $1200 an ounce in early Asian trading on Tuesday.

At 07:10 BST, the Brent front month contract was trading up 41 cents or 0.71% at $58.34 per barrel, while the WTI was also trading up 41 cents or 0.79% at $52.32 per barrel. It came as industry data provider Genscape recorded another rise in US crude oil stocks at Cushing, Oklahoma, the country’s oil distribution gateway.

Last week, US crude stockpiles expanded to 482.4 million barrels in the seven days ended 3 April, the highest level in weekly records dating back to August 1982, the EIA said.

Gold dropped after US Federal Reserve’s Jeffrey Lacker reiterated his call for the central bank to consider hiking interest rates in June, and saying there was “no shame” in adjusting them lower again if economic data demanded it.

COMEX gold was trading down 0.49% or $5.90 at $1,193.40 an ounce following overnight losses. Spot gold was also in the red down 0.43% or $5.16 at $1,193.72.

Gains in the dollar, which has benefited from anticipation of a US rate hike, continue to weigh on gold. However, analysts at Bank of America Merrill Lynch opined that once muted rate increases get priced in, gold should push higher. Their base case for the metal is to average $1,500/oz by the Q4 of 2017.

“Having said that, Plaza 2.0, i.e. monetary policy coordination given that competitive devaluations are not a zero-sum game, is one scenario we may reach this level earlier,” they added.

Meanwhile, Chinese data and anticipation of poor demand weighed on the copper market. The three-month LME copper contract ended Monday’s trading at $5,989 a tonne, down 0.8% on Friday's close.

China's March copper imports rose 46.4% month-on-month to 410,000 tonnes but were not deemed strong enough to offset the dollar’s strength.

Alastair McCaig, market analyst, IG said: “Chinese government promises that multi-trillion US dollar infrastructure spending programmes were coming have yet to materialise and their absence has seen a shortfall of bullish enthusiasm.”

Elsewhere, CBOT corn and wheat contracts, ICE Cocoa and Cotton contracts were all trading in the green.