Oil prices fell more than 2% on Tuesday, but Brent crude was still above $110 per barrel as re-escalation in tensions in the Middle East limited losses.
Gold prices recovered after dropping to a five-week low in the previous session.
This rebound occurred as oil prices slightly decreased.
Meanwhile, silver contracts on COMEX edged higher, tracking gold’s movement.
Among base metals, aluminium, copper and zinc were all in the green on Tuesday.
Market activity is subdued this morning, primarily due to the ongoing holidays in Asia.
With China closed until Wednesday and Japan until Thursday, early trading has seen limited liquidity and muted price movements.
“With two of the largest metals consuming regions effectively paused, the market is lacking direction and participants are waiting for fuller volumes to return midweek,” Neil Welsh, head of metals market at Britannia Global Markets, said in a commentary.
Oil slips
Oil prices worldwide fell on Tuesday, the day following the US’ commencement of an operation intended to reopen the Strait of Hormuz to shipping.
However, the drop was mitigated by ongoing exchanges of fire between the US and Iran.
According to Maersk, the US-flagged vehicle carrier, Alliance Fairfax, has left the Gulf through the strait. The vessel was accompanied by the US military.
At the time of writing, Brent crude oil was at $112.61 per barrel, down 1.6%, while the West Texas Intermediate oil was at $104 per barrel, down 2.3%.
On Monday, Iran launched a counter-measure in the Gulf against US attempts to control the Strait.
This waterway is vital, connecting the Gulf to broader markets and typically facilitating the daily transit of oil and gas supply equivalent to about 20% of global demand.
Simultaneously, multiple merchant ships in the Gulf reported incidents of explosions or fires.
Furthermore, an oil port in the United Arab Emirates site of a major US military base was set on fire by Iranian missile attacks.
Iran has resumed attacks on neighboring countries’ infrastructure.
The UAE intercepted missiles and a drone hit Fujairah port, a vital oil export hub outside the Strait of Hormuz, enabling continued (and increased) oil exports despite the war and blockade.
Despite multiple pre-ceasefire attacks on Fujairah, oil loadings continued with only brief interruptions.
In April, Fujairah’s crude oil exports reached almost 1.7 million barrels per day, according to LSEG data.
“Markets may find some relief today following President Trump’s overnight comments suggesting the conflict could continue for another two to three weeks,” Warren Patterson, head of commodities strategy at ING Economics said in a note.
However, markets are likely to view this with considerable scepticism, given the recent escalation and the repeated extensions of projected timelines for ending hostilities since the conflict began.
Gold rebounds
Gold prices rebounded on Tuesday, recovering from the five-week low hit in the prior session.
This recovery coincided with a slight dip in oil prices.
However, ongoing concerns regarding Middle East tensions and inflation served to temper the gains.
The COMEX gold contract was last at $4,571.36 an ounce, up 0.8%, while silver was $74.118 per ounce, also up 0.8%.
Brent crude futures dropped on Tuesday but managed to stay above $110 a barrel.
This dip occurred as investors focused on developments in the Middle East.
The already delicate regional ceasefire appears to be fracturing again.
The US and Iran are engaged in renewed, competing attacks for control of the Strait of Hormuz, with conflicting reports circulating about vessel traffic through the strait in recent days.
Since the US-Israeli conflict with Iran began in late February, gold prices have moved inversely to crude.
Although gold is typically a hedge against geopolitical instability, the rising cost of energy has fueled inflation worries and diminished expectations for interest rate cuts, causing gold to fall by over 13%.
In a high interest rate environment, assets with higher returns become more attractive to investors, diminishing the appeal of non-yielding bullion.
“Meanwhile, the broader strength in the USD will only add further pressure,” Ewa Manthey, commodities strategist at ING Economics, said in a note.
“For now, the gold market appears less focused on the lingering geopolitical risk and more on rising Treasury yields,” Manthey said.
Since the onset of hostilities in the Persian Gulf, gold ETF holdings have decreased by over 2.2%.
Furthermore, the managed money net long position in COMEX gold is now at its lowest point since February 2024.
This week, investors are closely watching key US jobs data including job openings, the ADP employment report, and the April payrolls report as these figures are expected to significantly influence the US Federal Reserve’s policy decisions.
The post Commodity wrap: Gold rebounds from 5-week low as oil slips 2% appeared first on Invezz
