Gold prices continued to rally on Friday as weak economic data from the US raised hopes of interest rate cuts by the Federal Reserve.
Elsewhere, crude oil prices slumped and were headed for steep weekly losses ahead of a crucial meeting of the Organization of the Petroleum Exporting Countries and allies on Sunday.
Copper prices were largely unchanged at the time of writing, even as the base metal market focuses on China’s trade data.
Gold hits record highs
Gold prices reached an unprecedented high on Friday, hitting a record of $3,655.50 per ounce.
This surge was driven by disappointing US jobs figures, which amplified expectations for interest rate reductions by the Federal Reserve, a move typically favorable to gold.
Gold has experienced significant gains, climbing over 36% this year on the heels of a 27% increase in 2024.
This surge is attributed to a weaker US dollar, increased central bank purchases, a less restrictive monetary policy, and general geopolitical and economic instability.
US job growth significantly slowed in August, with the unemployment rate rising to 4.3%, indicating a softening labor market. Consequently, traders are now pricing in an 86% probability of a 25-basis-point rate cut and a 14% chance of a 50-basis-point cut in September.
“The gold price has now finally broken out of its months-long trading range to the upside,” Barbara Lambrecht, commodity analyst at Commerzbank AG, said in a report.
Gold’s impressive rally has propelled other precious metals, with silver reaching a 14-year high of $41.5 per ounce.
Platinum has also seen gains, climbing $100 since last Friday, though it remains below its yearly high of nearly $1,500 per ounce.
Oil extends steep losses
Oil prices fell for a third consecutive session on Friday, on track for their first weekly decline in three weeks.
Brent crude prices fell 2.6% to trade at $65.20 per barrel, while the West Texas Intermediate crude was trading at $61.65 a barrel, down 2.9% at the time of writing.
This downturn is driven by rising expectations of increased supply and an unexpected surge in US crude inventories, which exacerbates worries about demand.
OPEC+ is set to discuss a potential increase in production at Sunday’s meeting, with eight members considering further hikes.
This comes as US crude inventories unexpectedly rose by 2.4 million barrels last week, contrary to analyst predictions of a decline.
“If the eight OPEC+ countries were to agree on another production increase, we believe this would place significant downward pressure on oil prices,” Lambrecht said.
After all, there is already a significant risk of a supply surplus.
A further increase in oil production by OPEC+, which accounts for roughly half of the world’s supply, would signify the premature reversal of a second phase of output reductions.
These cuts amount to approximately 1.65 million barrels per day, representing 1.6% of global demand, and are being unwound over a year ahead of schedule.
If production is indeed increased further, the already considerable oversupply threatens to become even larger in the autumn and next year. OPEC+ could then be forced to cut supply again next year to prevent oil prices from slipping well below USD 60.
Copper flat
Focus in the base metals markets will also likely be on China’s trade data.
Beyond general trends in the global metals market, the focus will acutely shift to copper ore imports, particularly as they pertain to the manufacturing and industrial output in China.
There are already initial projections from industry analysts and market intelligence firms suggesting a potential decline in copper production within China, specifically for the month of September.
This anticipated reduction in domestic output will inevitably increase China’s reliance on imported copper ore to meet its extensive industrial demand, which is crucial for sectors ranging from electronics and construction to automotive and renewable energy.
The implications of this heightened import dependency could reverberate across the global supply chain, potentially influencing international copper prices and creating a more competitive landscape for securing raw materials.
Furthermore, any sustained decline in Chinese copper production could signal broader shifts in industrial policy or resource allocation within the country, warranting close observation by market participants.
Lambrecht said:
This is primarily attributed to a shortage of scrap copper; however, disappointing copper ore imports could exacerbate concerns about supply shortages.
At the time of writing, the three-month copper contract on the London Metal Exchange was at $9,887.60 per ton.
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