Commodities: Dollar spike pummels precious metals, oil heads lower

The precious metals market registered huge declines on Friday, as a positive US jobs report, seen to be increasing the likelihood of an interest rate hike, sent the dollar soaring to record intraday highs against a basket of global currencies.

COMEX gold futures fell 1.53% to $1,087.30 an ounce, while spot gold was 1.49% or $16.50 lower at $1,087.42 an ounce, extending overnight declines. COMEX silver fell 1.69% or 25 cents to $14.73 an ounce, while spot platinum was 0.88% or $8.34 lower at $942.16 an ounce.

“The strong dollar knocked commodities down across the board with gold and silver seeing some of the biggest losses. With bank deposits and US treasuries now set to yield more, precious metals as non-yielding assets are losing their allure as a safe-haven,” said Jasper Lawler, analyst at CMC Markets.

Base metals also felt the heat from a stronger dollar, with greenback priced raw material imports turning dearer for emerging markets considered their primary importers. Akin to gold in the precious metals complex, copper carried the can for base metals.

In late afternoon trading on the London Metal Exchange, the three-month copper delivery futures contract was down 1.0% to $4,994.50 per metric tonne, extending the previous session’s losses. Additionally, lead (down 0.2%), tin (down 0.3%) and zinc (down 0.4%) futures also traded lower. However, aluminium (up 0.7%) and nickel (up 0.4%) avoided a drop into negative territory.

Meanwhile, oil futures headed for a third day of losses, as a stronger dollar combined with oversupply concerns to dominate market sentiment. The Brent front-month futures contract for December delivery was down 1.06% or 51 cents to $47.47 per barrel, while the WTI was down 1.81% or 82 cents at $44.38 per barrel.

Oil traders continue to factor in the possibility of incremental barrels coming from Iran and Iraq, as the US Energy Information Administration reported that commercial crude inventories rose by 2.8m barrels in the last week to a total of 482.8m barrels, with US oil imports at a 25-year low.

Finally, in line with the wider commodities complex, headline agricultural futures also slipped into negative territory. CBOT corn (down 0.93%), wheat (down 0.99%), ICE cotton (down 0.26%), cocoa (down 0.61%) and CME live cattle (down 0.28%) were all trading lower in early US trading.