The gold and silver price were down on Tuesday, as investors continued to be on edge ahead of the release of several key US economic statistics.
In the last week precious metals prices have been volatile, with a significant drop from their all-time-highs. This is due to profit taking and an excessively bullish position.
Oil prices rose due to concerns about supply disruptions in the face of ongoing tensions with Iran and the US.
The base metal price is lower, due primarily to the slight strengthening of dollar and reduced Chinese demand.
As China approaches a major holiday season, it is expected that the purchasing power of China will be weaker.
Slips of gold and silver
Gold and silver, after two positive days in the market, both fell on Tuesday as US employment data is due later this week.
The uncertainty around US monetary policies, and in particular the possibility of a leadership change at the Federal Reserve, also contributed to increased volatility.
The demand for safe-haven precious metals has fluctuated because of the conflicting events surrounding US-Iran relations.
The US issued a warning to US flagged vessels that navigate the Strait of Hormuz on Monday, despite some progress in the weekend’s talks about Iran’s nuke program.
Gold and precious metals have recovered some recent losses but are still much lower than the highs of late January, with traders hesitant to buy them as fervently.
Gold on COMEX, despite the price decline, was still near $5,100 an ounce when this article was written.
Silver fell 1.4% to $81.118 per ounce, compared with the previous closing.
The focus of this week will be the release of important US economic data, which will give further insights into the state of the largest economy in the world and the direction that interest rates will take.
The week will be filled with key data. The December retail sales numbers will provide a more accurate picture of consumer trends in view of recent labour market difficulties.
The January Nonfarm Payrolls Report is due to be released Wednesday, and the Consumer Price Index for the month of February will be published on Friday.
The Federal Reserve is primarily focused on inflation and the strength of the labour market. Both the inflation and jobs reports will likely have a major influence on the Fed’s future interest rate decisions.
Gains in oil
The tensions between Washington, D.C. and Tehran raised concerns about the possibility of supply disruptions along the Strait of Hormuz. This was due to the US’s guidance on transiting vessels. Tuesday saw a small increase in crude oil prices.
In a Reuters article, Tamas Varga was quoted as saying, “The market remains focused on tensions between Iran & the US.”
Prices will start to fall if there are no concrete signs that supply is disrupted.
The US Department of Transportation’s Maritime Administration issued an alert on Monday that caused oil prices to rise by more than 1%.
The advisory advised US-flagged vessels to steer clear of Iranian territorial waters and refuse verbally permission to Iranian forces if they were asked.
Strait of Hormuz is an important chokepoint that connects Oman with Iran. It’s through this strait that approximately one fifth of all oil consumed in the world passes.
Any escalation of tensions in the region is a threat to oil supply worldwide.
This strait is the main route through which crude oil exported by Iran, Saudi Arabia, Kuwait, United Arab Emirates and Iraq, as well as other OPEC countries, are shipped to Asia.
The guidance still went out despite the fact that Iran’s top diplomatic official stated last week the nuclear negotiations with the US, mediated by Oman, had made a good start and would continue.
Goldman Sachs’ analysts wrote a note on Tuesday that geopolitical forces are driving up prices.
The increase in the amount of oil transported by vessels is due to buyers looking for more supplies amid increased uncertainty.
According to a document reviewed by Reuters on the proposal, the European Union intends to expand its sanctions against Russia.
This extension will target the ports of third-country countries for the first time. These include those in Georgia, Indonesia, and other places that handle Russian oil.
Brent crude was $0.4% higher, at $69.28 per barrel, than West Texas Intermediate crude, which was $64.44 per barrel, an increase of 0.2%.
Base metals fall
Prices of copper, zinc and aluminium fell Tuesday in advance of the Chinese New Year holiday.
Neil Welsh, Britannia Global Markets’ head of metals, wrote in an email that, “Even though demand for red metal is sluggish, supply concerns are supporting the price at its current level.”
ANZ’s analysts point out in a report that Chile is facing supply issues.
It is difficult to maintain current production levels, much less increase it to meet the growing demand.
The US has increased its copper stocks due to fears that President Donald Trump may impose tariffs on refined metals.
The surge of stockpiles in recent years has also limited the amount of metal available on the market.
Carbon Border Adjustment (CBAM) is a new EU mechanism that, as of January 1, 2018, prices goods imported into the EU by non-EU nations for carbon emissions in order to encourage cleaner industrial production.
The anticipated increase in border fees is a concern for certain sectors, such as the aluminum industry of China, which falls under this category.
Welsh says that the uncertainty over the future of the EU CBAM is the main cause for anxiety in the nonferrous metals sector, and not the cost increases.
The key industry question is: will indirect emissions from aluminum products be covered? The CBAM will it cover non-ferrous materials?
Third, whether China’s carbon market is able to offset the EU CBAM.
Carbon Border Adjustment (CBAM), a mechanism of the EU, allows companies to reduce costs through the offseting of carbon fees already paid in the country where the products are produced against CBAM charges.
Many businesses see this as an effective way to reduce costs.
The significant differences in the carbon price complicates this.
The average price of carbon in 2025 under the EU Emissions Trading System was EUR75 (88 dollars) per tonne, which is about nine times more expensive than the price of carbon on China’s domestic carbon market, where the price per tonne was approximately 70 yuan (10 dollars).
The post Commodity Wrap: Bullion drops ahead of key data, oil rises on fears about supply disruptions may be updated as new information is released.
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