Commodities: Oil tumbles again, silver seen outperforming gold

Oil and gold futures slid on Friday, while selected base metals contracts headed lower as another mixed trading week for the commodities markets neared its end.

Precious metals remained in negative territory with market chatter of silver outperforming gold gaining traction. At 1439 BST, COMEX gold for December delivery was down 0.48% or $5.30 at $1,104, while spot gold was down 0.86% or $9.55 at $1,101.20 an ounce.

COMEX silver was down 0.85% or 12 cents to $14.52 an ounce, while spot platinum was down 1.67% or $16.40 to $964.38 an ounce. Kelly-Ann Kearsey, dealing manager at GoldMoney, said silver continued to be the favourite precious metal.

“We continue to see volatility in the gold market, while silver remains on top in volume and value. This week, the number of job openings in the US was at a 14 year high, which prompted a surge in the value of the dollar, increasing its strength against precious metals and lowering the value of gold. Speculation over US interest rates has also led to uncertainty,” she added.

Meanwhile, base metal futures sent mixed signals on the London Metal Exchange yet again, with some contracts failing to extend marginal gains achieved over the previous European session on fresh concerns about China.

Past the midway point of trading on the LME, three-month delivery contracts of primary aluminium (up 0.5%) and tin (up 1.2%) were in positive territory. However, copper (down 0.9%), lead (down 0.9%), nickel (down 1.2%) and zinc (down 0.9%) were in all negative territory.

Oil benchmarks endured another volatile session in Asia, subsequently extending declines late into afternoon trading in Europe. An International Energy Agency (IEA) report predicting a decline in non-OPEC, particularly US, oil production failed to support prices.

The agency expects US oil production to drop by 0.4m barrels per day (bpd) in 2016 versus a growth of 1.7m bpd recorded in 2014. At 1447 BST, the Brent front month futures contract was down 2.56% or $1.25 to $47.64 per barrel, having registered losses for much of the Asian session. WTI futures, down 2.70% or $1.24 to $44.68, narrated a similar tale of woe.

Meanwhile, investment bank Goldman Sachs cut its 2016 Brent price forecast to $49.5 a barrel from $62 and warned there is a risk prices could fall to as low as $20, noting that OPEC production has surprised sharply on the upside and Iran has the potential to ramp up in 2016.

The bank said the market will need US production growth again in 2017 and left its Brent forecasts for 2017-18 unchanged at $65 a barrel.

Finally, major agricultural commodities futures were also in negative territory, albeit marginally. CBOT corn (down 0.07%), wheat (down 0.52%), ICE cotton (down 0.54%) and CME live cattle (down 0.33%) futures were all in positive territory.