Gold is breaking records. As the rally continued, the yellow metal broke the historic $5,200 and $5,300 mark on Wednesday.
The COMEX silver price also remained strong, as it broke $116. This was the first time the metal had ever done so.
Oil prices rose by more than 1 percent to a record high of more than four months as the US winter storm disrupted refinery and production operations.
Investors are becoming more concerned about the US’ uncertain policy trajectory as a result of the US Dollar dropping to its lowest level in four years. All base metals saw higher trading against this background.
The US Federal Reserve will hold a two-day meeting on policy later this Wednesday.
Gold records: more to come
The demand for gold as a safe haven was boosted by concerns over the stability of the US dollar and independence of the US Federal Reserve.
The metal price soared to $5,300 an ounce on Wednesday as a result of the surge in demand.
The dollar was near the four-year low on Wednesday. This position was maintained, even though US President Donald Trump had downplayed recent losses.
The weakening dollar has made buying gold in US dollars more attractive to international buyers.
Metal prices have risen by over 20% in the first few months of the year, building on the record-breaking gains of last year.
Analysts at Deutsche Bank predict that gold will reach $6000 an ounce in this year. This forecast is based on sustained demand for investment.
David Morrison is a senior analyst with Trade Nation. He said, “Gold has returned to the forefront of headlines after being largely overlooked during last year’s rise in all-time records.”
It’s getting the attention it deserves. These headlines may come a little too late to attract new investors.
Silver is also experiencing disruptions due to discussions of new paradigms and significant demand from the industry.
Silver prices were 7.5% higher, at $113.800, and gold was up by 3.2% at $5286.30.
COMEX had set a new record for silver at $116.110 per ounce.
Oil prices jump
The price of crude oil reached its highest level since September late on Wednesday.
Winter storms in the US disrupted crude production, and a falling dollar as well as ongoing power outages throughout Kazakhstan added to upward pressure.
Oil sentiment has changed dramatically.
The oil price has clearly broken its downward trend that was in place since the summer of last year and is now well-positioned for a comfortable trade above $60 per barrel.
According to Vortexa, an intense winter storm in the US caused crude oil exports from US Gulf Coast port to drop to zero.
On Monday, however, exports of these products saw a recovery.
Morrison said that the recent surge in oil prices was driven by concerns about supply after the severe winter storm which hit the East Coast of the US and knocked down roughly 15% of its national production and stopped crude and LNG from Gulf Coast port.
The oil price rise is also partly driven by the production loss in Kazakhstan.
Sources suggest that the recovery may take more time than a week.
Separately the CPC pipeline operator, responsible for approximately 80 percent of Kazakhstan’s oil exports has restored full loading capacity to its Black Sea Terminal.
Brent crude oil was trading at $67.15 per barrel. This is a 0.8% increase.
Base metals higher
Investors were worried about the unpredictable US policies as they saw the US Dollar drop to the lowest levels in the past four years against the major currencies.
Trump, however, expressed his confidence in the performance of the dollar on Tuesday. Trump dismissed any concerns over its declining value and said that exchange rates would fluctuate.
Neil Welsh, Britannia Global Markets’ head of the metals markets, wrote in a commentary that the decline of the dollar isn’t over, despite Trump’s apparent lackluster concern.
Dollar is under pressure from structural factors, such as Fed independency, budget deficits that are growing, fiscal profligacy concerns, and polarization of politics.
The market is cautious at the moment, and some bulls are opting to sell their positions.
The lack of clarity regarding the US Federal Reserve’s rate-cut trajectory is the primary reason for this, and it’s compounded with geopolitical uncertainty stemming from US action in Iran or Venezuela. The focus is on the Fed’s upcoming interest rate announcement.
Goldman Sachs Group says that the rallying price of base metals could soon be challenged.
The bullish sentiment of the market and rising prices is beginning to clash with the weakening demand for products, especially in China.
A copper market study by the firm revealed that industrial users are reducing their activity. This has led to a drop of 10% to 30% in order books. Demand for grids is also starting to decline.
Goldman Sachs has raised its forecasts on the price of aluminium.
According to a note, the bank has now projected that aluminum prices will be $3,150 per ton during the first six months of this year. This is a significant increase from the previous estimate of $2,575. However, the figure still remains lower than current market rates.
London Metal Exchange’s three-month contract for copper was $13,165 a ton. This was up by 1%. The contract for aluminium was $3,289.50 per ton.
The post Commodity Wrap: Gold hits record $5300, Silver tops $116 and Oil surges due to storm disruption could be updated as new developments unfold.
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