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Precious metals inched lower on Monday despite a pullback in the dollar, as investors exercised caution ahead of a key U.S. inflation print that could shed some light on the Federal Reserve’s rate cut trajectory, while the escalating tensions in the Middle East provided limited losses in bullion. Spot gold (XAUUSD:CUR) was down -0.20% to $2,031.59 an ounce b y 6 am ET.
Many investors consider gold to be a safe-haven hedge against inflation, and the metal has held its ground despite some pushing back rate cut expectations. But higher for longer, interest rates tend to dull the appeal of the non-yielding asset.
On the base metals side, global manufacturing activity has picked up in recent months, and this bodes well for industrial metals demand ahead of the seasonal strong period, ANZ analyst’s noted. For copper specifically, which is down more than 1% on the day, brokerage notes, mine supply continued to disappoint in 2023, despite a slight recovery towards year-end, while a slower growth in electric vehicle sales and strong supply are weighing on battery metal prices.
Meanwhile, Australian iron ore magnate Andrew Forrest said on Monday, the London Metal Exchange should classify its nickel contracts into “clean” and “dirty” contracts to give customers more choice, Reuters reported.
Oil prices too extended losses on Monday, in part due to fear of higher-than-expected inflation could delay cuts to high U.S. interest rates, which have been capping global fuel demand growth. Last week, Brent declined about 2% and WTI fell more than 3%. Investors also kept an eye on the impact on Russian oil supply after the United States sanctioned Moscow’s leading tanker group, Sovcomflot.
The geopolitical risk premium from Yemeni Houthis’ attacks on ships in the Red Sea remained modest at only a $2 a barrel boost to Brent, Goldman Sachs analysts said in a note.
Separately, JPM said, increasing pressure from electrification and efficiency gains will likely lead to a first on record outside of recession contraction in global gasoline demand in 2025 and a cumulative loss of 0.9 mbd by 2030.
Elsewhere, among agriculture commodities, soybean and wheat fell, while cocoa rose.
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Read More: Commodity Roundup: Precious metals, oil edge lower; Rate talks, Middle East