Commodities: Oil up, but gold plummets on Yellen comments

Oil benchmarks continued to post an uptick, but gold declined after US Federal Reserve Chairwoman Janet Yellen raised expectations of an interest rate rise at some point over the remainder of this year.

In a speech at the University of Massachusetts on Thursday evening, Yellen said, “Most FOMC participants, including myself, currently anticipate an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter.”

Yellen said she expects inflation to return to the Fed’s 2% target over the next few years and that weak growth in emerging economies will not have a big enough impact on the US to influence policy.

In response, precious metals were dragged lower by gold. At 1601 BST, COMEX gold for December delivery was down 0.87% or $10.00 at $1,143.80 an ounce, while spot gold was 0.79% or $9.09 lower at $1,155.04 an ounce.

COMEX silver was seen coping better, down 0.20% or three cents to $15.10 an ounce, while spot platinum was 0.76% or $7.29 lower at $947.68 an ounce, as the dollar sent emerging market currencies down and spiked to a five-week high against a basket of major currency crosses.

Meanwhile, oil markets looked to end the week on a high, with the Brent front month futures contract for November delivery up 0.11% or 32 cents at $48.39 per barrel. Concurrently, the WTI was up 0.80% or 36 cents to $45.27 per barrel.

Selected base metal futures fell further on the London Metal Exchange extending week long declines. At 1635 BST, LME’s three-month delivery contracts of primary aluminium (down 0.4%), copper (down 0.5%), lead (down 1.1%), tin (down 0.7%) and zinc (down 2.3%) were trading lower. Only nickel (up 0.3%) avoided the drop, something which SP Angel analysts reckon will be tested over the coming weeks.

“The nickel market is currently being affected by high levels of ore inventories available in Chinese ports as well as an increase in ore supply from Philippines and ore blending. However, moving forward, we expect fundamentals to improve on a decline in the growth of Chinese nickel pig iron production and underinvestment.”

Finally, agricultural commodities futures were largely in positive territory. CBOT corn (up 1.18%), wheat (up 2.06%), ICE cotton (up 0.46%) and CME live cattle (up 2.24%) futures were seen heading higher.

However, ICE cocoa futures were trading lower for the first time in seven sessions down 0.39% at $3280 per tonne, as traders looked ahead to market data that is set to forecast a softening demand for the main ingredient in chocolate manufacturing.