Commodities: Gold futures spike 5% on safe haven calls

Gold futures spiked by more than 5% following safe haven calls on Thursday, while oil benchmarks and base metals endured yet another torrid session.

Continuing her testimony to Congress, US Federal Reserve Chairwoman Janet Yellen said there was a “chance” of a recession as financial conditions worsen abroad. Speaking to the Senate Banking Committee, the Fed Chair also said the global selloff could impact growth in the US economy.

"There is always some chance of recession in any year," she said. "But the evidence suggests that expansions don't die of old age.

As equities and the wider commodity market witnessed turmoil, investors queued up to make safe haven calls sending gold prices soaring. At 1739 GMT, the COMEX front-month gold futures contract was up 5.16% or $61.60 to $1,256.20 an ounce, while spot gold was up 4.07% or $48.71 to $1,245.83 an ounce.

COMEX silver also rose 4.47% or 68 cents to $15.97 an ounce, while spot platinum, rose by 2.82% or $26.34 to $961.09 an ounce

However, headline base metal futures were largely in negative territory on the London Metal Exchange. At 1635 GMT, three-month futures contracts of copper (down 0.5%), primary aluminium (broadly flat), nickel (down 4.9%) and tin (down 1.4%) headed lower, but zinc (up 0.9%) and lead (up 0.8%) avoided the drop.

Liz Grant, senior account executive at Sucden Financial, said “The LME was almost the forgotten market on Thursday as traders and investors busied themselves putting out fires in the broader financial world as the doomsday scenario gripped the planet.

“LME trading volumes were low across the board and price activity was narrow. It was one way street south for equities as the market showed lack of faith in central bank economic stimulus and the only way was up for gold and the Yen with the continuation of safe haven buying and panic short covering.”

Meanwhile, oil fell back into negative territory a day after the Energy Information Administration – statistical arm of the US Department of Energy – reported commercial crude inventories fell by 754,000 barrels to a total of 502m barrels last week. Market expectations were in the region of 3.6-3.7m barrels.

However, crude oil stocks at the country’s storage hub of Cushing, Oklahoma hit a new record last week after rising 523,000 barrels to 64.7m barrels. Additionally, US weekly commercial crude oil imports fell to 7.1m barrels per day from 8.3m bpd recording the biggest week-on-week decline last week since December 2014.

Elsewhere, Reuters reported that Saudi Arabia might be willing to sign-up to a Venezuelan proposal that producer countries from the Organisation of the Petroleum Exporting Countries and those from outside ‘freeze’ their oil output at current levels if Iran also signed up to such an agreement.

Brent front-month oil futures contract was down 1.23% or 0.38 cents to $30.46 per barrel, while WTI fell 1.57% or 43 cents to $27.02 per barrel.

Finally, agricultural commodity futures were also in negative territory. CBOT wheat (down 0.43%), ICE cocoa (down 1.65%), CME live cattle (down 1.23%) and ICE cotton (down 0.70%) headed lower.