Commodities: Oil, gold head lower after Fed decision

Oil and gold futures took a hammering on Thursday, following the US Federal Reserve’s decision to raise benchmark interest rates by 25 basis points.

Speaking at a press conference after the policy announcement late on Wednesday, Fed Chairwoman Janet Yellen assured the market that any future rate increases would be gradual and depend on economic growth.

She added that if the Fed had continued to delay a rate rise it could have been forced to implement a more aggressive increase if economic growth soared and inflation suddenly jumped towards the 2% target.

At 1734 GMT, the Brent front-month futures contract was down 0.67% or 25 cents to $37.14 per barrel, while WTI was 2.31% or 82 cents lower at $34.70 per barrel, as a stronger dollar added to the oil market’s list of oversupply and tepid demand woes.

Precious metals also continued lower, with the COMEX gold futures contract down 2.32% or $25.00 to $1,051.80 an ounce, while spot gold was 1.93% or $20.73 lower at $1,051.59 an ounce. Away from gold, COMEX silver fell 3.81% or 54 cents to $13.71 an ounce, while spot platinum was down 3.48% or $30.41 at $843.49 an ounce.

Jasper Lawler, analyst at CMC Markets, said, “The announcement of US oil exports had seen prices begin to converge but then diverged again overnight when both prices fell in unison following the much larger than expected build in weekly inventories stateside.

“Meanwhile, the Fed rate hike has brought about a collapse in the price of gold. The price has fallen 2% to near fresh five-year lows. The huge gold rally after the December non-farm payrolls that signalled a rate hike has turned into a total red herring as it gets crushed on the rate hike itself.”

Elsewhere, base metals took another tumble in European trading on persistent concerns about China’s importation levels, as copper remained near six-year lows. At 1634, the three-month copper delivery futures contract was down 1.0% to $4,549.00 per metric tonne on the London Metal Exchange.

Additionally, primary aluminium (down 0.5%), nickel (down 1.0%), lead (down 3.4%) and zinc (down 1.15%) futures were also in negative territory.

“The only base metal to remain in positive territory was tin which has its own set of supportive fundamentals, but for the rest it was a slow grind to lower levels with lead falling sharply as this week’s LME stock inflows weigh and the technical picture deteriorates. However, support at lower end of recent ranges remains intact excepting lead,” said Liz Grant, senior account executive at Sucden Financial.

Finally, agricultural commodity futures were on negative turf in early trading stateside. Headline contracts, including CBOT corn (down 1.42%), wheat (down 2.17%), ICE cocoa (down 1.28%), cotton (down 0.36%) and CME live cattle (down 1.38%) futures were all trading lower.