Commodities: Gold pummelled but base metals recover in European trading

Gold futures were firmly in retreat mode on Tuesday with signs of a possible resolution to the Greek debt crisis denting confidence in the precious metals market as their safe haven tag seemed to be slipping.

At 14:45 BST, COMEX gold for August delivery was down $5 or 0.42% at $1,179.10 an ounce, while spot gold was down $7.41 or 0.62% at $1,178.57 an ounce. COMEX silver for July delivery was down 30 cents or 1.87% or $15.84 an ounce, but spot platinum bucked the trend marginally by 0.20% or $2.08 at $1,063.93 an ounce.

David Madden, market analyst at IG, said, “Gold is losing its appeal and the strength of the equity market is exacerbating the problem. Traders no longer have the fear factor when it comes to the eurozone, and the possibility that Greece will have a deal at the end of the week has triggered a sell-off in gold.”

“The second reason behind gold’s decline is the Federal Reserve may be raising interest rates this year. The US central bank may not be in a rush to ramp up interest rates but it is making small steps towards it, and all the while gold is feeling the pain.”

For a change, base metals saw trading in positive territory with a plethora of three-month delivery contracts on the London Metal Exchange seeing green. Primary aluminium (up 1.8%), lead (up 1.1%), nickel (up 0.6%), tin (up 0.1%), zinc (up 0.3%) and copper (up 1.1%) were all trading up.

Meanwhile, oil benchmarks reverted to the norm with a sub-$60 price for WTI and a lower $60s one for Brent as oversupply concerns, possibility of an Iranian nuclear settlement and a relatively stronger dollar all conspired to push the price downwards.

The WTI front month futures contract was trading down 1.09% or 66 cents at $59.72 per barrel, while Brent was down 42 cents or 0.66% at $62.92 with broadly bearish sentiments entrenched in traders' thinking.

Andy Brogran, global oil and gas transactions leader at EY, said the market would have to contend with a fair bit of volatility over the short to medium term.

Speaking at an EY industry panel on Tuesday, Brogan said: “There is a structural change in the oil supply dynamic. We are seeing wholesale changes on the supply-side as producers look to re-position themselves in a changed operating climate. What is afoot still has some way to run yet.”

Finally, on the agricultural commodities front, CBOT corn (up 1.58%), wheat (up 1.78%) and CME live cattle (up 0.05%) were trading in the green, while ICE cotton (down 0.02%) and cocoa (down 0.55%) were seen to be retreating from their recent positive runs.