Commodities: Oil spike tempered in Asian trading, gold takes a pounding

At 07:36 London time, Brent front month futures contracts were trading at $65.48 per barrel, down 29 cents or 0.44% while the West Texas Intermediate (WTI) was down five cents or 0.10% at $58.53.

Both oil benchmarks traded at year-highs overnight as the dollar weakened marginally, and US crude inventories saw a decline at Cushing, Oklahoma, the country’s oil storage hub.

In its weekly petroleum report, the US Department of Energy noted its first decline in inventories at Cushing since late November of half a million barrels to 61.7m. The drop was interpreted by traders as a sign of cutbacks in high US crude-oil production, even though headline inventories stateside grew by 1.9m barrels last week to 490.1m barrels.

Joshua Mahony, market analyst at IG, said: “Oil prices are attempting to capture further gains to accompany an already strong April, following a worse-than-expected US inventories number.

“Whilst growth in stockpiles was significantly less than expected the fact is that US stockpiles are higher than ever, and at some point they will have to unload them onto the markets.

"For now they appear to be holding back for a better price, yet the warning signs of another fall are there.”

The dollars relative weakening [€1= $1.10284 at 08:27 BST] also had a bearing as the Fed left interest rates unchanged, but kept its powder dry over the timing of a future rate rise.

The US central bank said the slowdown in the economy was "in part" due to transitory factors, but predicted that US growth would return to a "moderate pace."

It did not prevent gold taking a plastering, shedding as much as $10 at one point in US trading overnight, though it managed to stay above the psychologically relevant $1,200 an ounce level.

COMEX gold was down $6.90 or 0.57% at $1203.10 an ounce, while spot gold was down $1.60 or 0.13% a $1,203.11. Continuing with precious metals COMEX silver was also down 18 cents or 1.06% at $16.53 an ounce.

Copper markets continue to strengthen for the third day running, as the LME three-month contract closed overnight at $6131.00 per tonne, up 0.5% or $28.50.

In a note to clients, Barclays said Chinese government spending on infrastructure was a key factor driving fresh demand for a whole host of commodities, including copper. The bank pointed to around 300 infrastructure projects valued at $1trn proposed this year alone by Beijing. However, Barclays analysts also opined that it was too early to predict whether the rally would hold.

On the soft commodities front, corn was seen to be marginally recouping Wednesday’s losses, as the CBOT contract was up 0.27% or a dollar at $368.75 per bushel. Elsewhere, CBOT wheat, ICE cocoa and cotton contracts were all up, however the CME live cattle contract was in the red.