The gold price fell Thursday due to a strong dollar, which weighed down on the demand from overseas buyers.
The price of silver also dropped sharply in parallel with the decline in gold. The stronger the dollar, the more expensive commodities are for foreign buyers.
The crude oil price rose on Thursday after two days of declines.
This uptick was supported by a larger-than-anticipated weekly reduction in US oil stockpiles; however, attention remained fixed on the developments in Venezuela.
The base metals markets are still volatile, resulting in lower prices for Thursday.
According to Neil Welsh of Britannia Global Markets, an FCA-regulated brokerage that offers a range of services, market concerns over tight supply of copper are increasing as the negotiations regarding the Mantoverde mine strike in Chile failed. This confirms a continuation of industrial action.
The US ADP Employment data showed an improvement of 47,500 in December. However, the market is still focused on Friday’s non-farm payroll release, as this will determine the direction for future monetary policies.
Silver and gold slump
Gold has declined from recent highs, but has managed to maintain its support at or above $4,400.
According to David Morrison of Trade Nation, despite the recent dip in price, the fundamentals still suggest a bullish future.
After an initial climb towards $4,500 gold prices are now declining for the second session in a row as investors take profits.
Investors are evaluating various economic data in anticipation of the release on Friday.
The data released on Wednesday showed a slowdown in hiring and a drop in US job openings to their lowest level in 14 months in November.
The markets are anticipating that the US Non-Farm Payrolls Data will be released, and this data is likely to provide additional insight into the direction of the monetary policy.
Investors have already factored in the Federal Reserve’s two rate cuts this year.
The US seized two oil tanks linked to Venezuela on Wednesday in the Atlantic Ocean. This was a geopolitical move.
After pushing up to $83 an ounce Monday, silver fell sharply on Tuesday.
Morrison:
Silver may appear to have formed a “double top” chart-wise. This may have convinced many traders that they should cut back on their exposure in the long term and take profits.
The COMEX Gold contract is currently at $4,438.40 an ounce (down 0.5%), while Silver was $74.365, which represents a 4.1% decline.
Oil climbs
The oil price rose more than 2 percent on Thursday, as data from the inventory boosted market sentiment.
According to the Energy Information Administration’s (EIA) latest inventory figures, US crude oil stocks have experienced the largest drop in the last week since the end of October. They fell by 3,83 million barrels.
Warren Patterson, ING Group’s head of commodities, said that the changes in refined products were “more bearish”.
According to EIA data, gasoline and distillate fuel oils both increased by 7,7 million and 5,6 million barrels respectively.
Patterson:
The figures reflect the fact that refinery runs are still strong and implied demand has been increasing over the past week.
Crude oil is yet to capitalize on the sharp rise it experienced at the start of this week.
The sellers have pushed prices lower, and the WTI crude for front-month has not been able to sustain any gains above $58 per barrel.
Morrison, from Trade Nation, said: “There’s evidence to suggest that there is a growing support for bull-bears around the $56 mark. This suggests that this battleground has now settled in an area of $2.”
Since the Trump Administration authorized the extradition from Venezuela of Nicolas Maduro to the US for criminal charges, oil prices have fluctuated.
After US President Donald Trump’s announcement that Venezuelan interim authorities will give up to 50 millions barrels of crude oil to the US, prices initially rose and then dropped.
Valero, Marathon Petroleum and other companies that can refine Venezuelan heavy crude have rallied in anticipation of unlimited oil deliveries.
Morrison said that “the prospect of an increased supply still outweighs near-term stock signals,” even though the rebuilding of Venezuela’s infrastructure may require many years and millions of dollars in investment.
The post Commodity Wrap: Dollar strength drags down gold and silver; inventory drops boost crude prices could be updated as new developments unfold.
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