Evening Track : Fed in Focus - Gold Hits All-Time Peak, Crude Slips on Inventory by Kotak Securities Ltd
Comex gold futures surged to a fresh all-time high of $3,052.4/oz, driven by heightened Middle East tensions and US tariff uncertainties. Profit-taking subsequently pushed prices below $3,040. However, concerns over a potential economic slowdown and recession, fueled by President Trump's trade tariffs, bolstered gold's safehaven appeal. The tariffs, including levies on steel and aluminum and forthcoming reciprocal measures, are expected to increase inflationary pressures. Geopolitical risks escalated with IDF strikes on Hamas targets in Gaza. Investors are now keenly awaiting the FOMC's decision and updated economic projections for assessing future monetary policy, particularly in light of these growing economic and geopolitical uncertainties.
WTI crude oil fell for the second day to trade near $66.50/bbl, pressured by API showed a build in US crude stockpiles. Moreover, President Putin's agreement to halt attacks on Ukrainian energy, coupled with rejected ceasefire proposals, fueled speculation of eased sanctions, exacerbating surplus concerns. OPEC+ production hikes further weighed on prices. Global trade shifts and potential demand weakening, highlighted by a larger-than-expected US crude stock build reported by API (4.593 million barrels), added downward pressure. Conversely, distillate and gasoline inventories saw declines of 2.146 and 1.708 million barrels, respectively, and Cushing reserves dipped 1.41 million barrels. Middle East tensions, posing supply disruption risks may provide some price support.
LME base metals trade mixed, with copper and aluminum holding gains while zinc saw a pullback. Supply tightness persisted as inventories on both London and Shanghai exchanges declined. Optimism in copper demand grew after China introduced a special action plan to boost consumer spending, supporting its economic outlook. Meanwhile, Zambia’s copper production rebounded, rising 12% in 2024 after hitting a 14-year low in 2023. However, concerns over potential U.S. tariffs on copper remain, adding uncertainty to the market. Aluminum prices continued to strengthen despite improved raw material availability, as fresh alumina capacity eased supply pressures.
European natural gas jump 5.2%, driven by escalating geopolitical tensions following renewed Russian assaults on Kyiv. Market speculation regarding potential Russian pipeline flow resumption, aimed at replenishing critically low European gas storage (below 35% of the 90% November target), was briefly fueled by news of a Putin-Trump call. However, Putin's insistence on war-ending terms and the subsequent drone attacks on Ukrainian cities effectively nullified any immediate prospects for increased supply. The failure to secure a meaningful ceasefire, despite the temporary cessation of energy infrastructure strikes, has exacerbated supply concerns, directly impacting natural gas price volatility.
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