Commodities round-up: Oil prices lower as gold maintains its allure
The state of China’s economy and demand destruction continues to weigh on the minds of investors as China faces a property crisis, falling exports, and weak consumer spending.
These challenges are also reflected in commodities price charts.
For oil, it is a case of weighing up supply and demand concerns, with countries such as Saudi Arabia extending crude output cuts into September with uncertainty over whether they will go deeper and for longer.
Oil prices
On Wednesday, demand concerns are putting more pressure on prices. US crude oil (CL=F), or West Texas Intermediate (WTI), was trading down 0.12% at $80.25 a barrel in early London trade, while Brent (BZ=F) declined 0.54% to $83.57.
Since the beginning of August, WTI has lost about 3% while Brent has lost about 2.40%.
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However, Craig Erlam, senior market analyst at OANDA, said: “There's always been a risk of US rates remaining higher for longer, while China's recovery has been sluggish for months, as has their response to it.
“We need to see a significant change in the trend of the data to seriously change the outlook for crude and we haven't seen that. It may come over the next month or so but for now, we just appear to have seen crude move into a higher range between $80-$90.”
Gold
Meanwhile, gold (GC=F) was trading higher on Wednesday, up 0.27% at $1,931.20 an ounce.
Naeem Aslam, chief investment officer at Zaye Capital Markets, noted how the precious metal has been in a $1,900 price level battle.
“The bulls are really trying their best to keep the price at this level, as it is considered an important level of support. The fresh comment from the Richmond Fed president made traders a little nervous again, as his message was very clear: traders should think carefully if they anticipate that the Fed is done with their interest rate hike cycle.”
He also noted that any weakness in the dollar could represent an opportunity for gold prices to move higher.
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Meanwhile, a dozen money managers said that they expect to maintain or raise their exposure to the precious metal in the coming 12 months with gold maintaining its allure, according to a poll by Bloomberg News between 10 August and 22 August.
More than two-thirds see gold prices rising, and five expect a clear all-time high.
“We do anticipate there’s pent-up gold demand from investors waiting for the Fed to finish,” Darwei Kung, head of commodities and portfolio manager at DWS Group, said.
Base metals
Iron ore was among the base metals on the rise on Wednesday, along with Nickel and Copper (HG=F).
However, gains in metal prices were limited by a firm US dollar as a stronger USD makes it more expensive to buy the greenback-priced metals.
China’s pledge to provide more support for its flagging economy may have lifted sentiment for the metals.
However, analysts at ING believe metals will stay under pressure in the second half of the year as the sluggish recovery in China will likely continue to weigh on demand.
“We believe that any improvements in metals prices will depend on the eventual implementation of China’s stimulus measures and actual demand improvement.”
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