Commodities: Oil falters, gold drops on Yellen comments

Oil futures dropped following an uptick in US crude inventories on Wednesday, while gold slipped on comments by Federal Reserve Chairwoman Janet Yellen about an interest rate hike still being on cards for December.

At 1704 GMT, the Brent front-month futures contract for December delivery was down 3.24% or $1.64 cents to $48.90 per barrel. The WTI was down 2.94% or $1.41 at $46.49 per barrel, with both benchmarks shedding overnight gains after the US Energy Information Administration reported commercial crude inventories rose by 2.8 million barrels in the last week to a total of 482.8 million barrels.

The data implied a sixth successive weekly rise, while crude oil imports by the US dropped to the lowest level in almost 25 years. Meanwhile, precious metals appeared to reverse the previous session’s declines in early Asian trading, but comments later in the session by Fed’s Yellen turned the tide.

In her testimony before the US House Financial Services Committee, Yellen opined the central bank’s 15-16 December Federal Open Market Committee meeting would be a “live” one - in reference to the possibility of a first rate hike occurring then - should economic data support such a move.

Not delaying the first rate hike would be prudent as it would allow for a gentler path of policy tightening, the Fed Chairwoman explained to the assembled US lawmakers. Her comments dented the already fragile confidence in the precious metals market.

COMEX gold was down 0.17% or $1.60 at $1,112.80 an ounce, while spot gold was 0.50% or $5.57 lower at $1,112.22 an ounce, reversing intraday gains and extending overnight declines further. COMEX silver fell 0.62% or nine cents to $15.15 an ounce, while spot platinum was 0.53% or $5.10 lower at $957.28 an ounce.

Meanwhile, base metal futures were broadly up in late afternoon European trading after the Chinese President Xi Jinping emphasised the country's GDP target for the next five years “should be” at least 6.5%. On the London Metal Exchange, primary aluminium (up 0.3%), copper (up 0.7%), lead (up 0.2%) and zinc (up 0.8%) three-month futures were all trading higher.

Additionally, positivity from China also helped, said Steve Hardcastle, Head of Client Liaison at Sucden Financial, as the country saw better than expected data from the Caixin Services PMI, which rose in October to 52.0, up from 50.5 in September.

"It inspired copper’s move up to a high of $5220 early afternoon, but this proved to be a false dawn under technical selling, the stronger dollar (again) exerting negativity and the whole complex eased back.

“Underlying dollar strength was bolstered by data on private sector job growth, the narrowing US trade deficit and increasingly loud calls that the Fed is likely to increase interest rates at the December meeting, following comments from Janet Yellen. Later afternoon trading has shown further copper weakness, but tin in particular, and the other metals are more resolute albeit under low volumes,” Hardcastle added.

Finally, headline agricultural commodity futures were on a mixed patch. CBOT corn (up 0.53%), and wheat (up 1.74%) futures were higher in early trading stateside. However, ICE cotton (down 0.64%), cocoa (down 1.97%) and CME Live Cattle (down 2.14%) futures were all trading lower.