Gold prices fell on Thursday as a stronger dollar weighed on demand among overseas buyers.
Silver prices also fell sharply, mirroring the drop in gold. A stronger dollar makes commodities priced in the greenback more expensive for overseas buyers.
Meanwhile, crude oil prices advanced on Thursday, recovering from two consecutive days of losses.
This uptick was supported by a larger-than-anticipated weekly reduction in US oil stockpiles; however, attention remained fixed on the developments in Venezuela.
Volatility persists in the base metals market, leading to lower prices on Thursday.
Market concerns about tight copper supply are escalating as negotiations concerning the Mantoverde copper mine strike in Chile have failed, confirming a continuation of the industrial action, according to Neil Welsh, head of metals at FCA-regulated multi-asset brokerage, Britannia Global Markets.
While the US ADP employment data for December showed an increase of 47,000, market focus remains fixed on the non-farm payroll report due Friday, which will be crucial for gauging future monetary policy direction.
Gold and silver slump
While gold has retreated from its recent peaks, it has successfully maintained support above the $4,400 mark.
Despite the recent short-term dip, the underlying price action still suggests a bullish outlook, according to David Morrison, senior market analyst at Trade Nation.
Following an earlier climb toward $4,500, gold prices have now declined for a second consecutive session as investors engaged in profit-taking.
The US dollar remained near a one-month peak, with investors evaluating varied economic figures in advance of Friday’s nonfarm payrolls release.
This follows Wednesday’s data, indicating a softening in the labor market, as US job openings fell to a 14-month low in November and the pace of hiring remained slow.
Markets are currently anticipating the release of the US non-farm payrolls data, which is expected to offer additional insights into the direction of monetary policy.
Investors are presently factoring in two interest rate reductions by the Federal Reserve this year.
Wednesday saw the US seize two oil tankers linked to Venezuela in the Atlantic Ocean, a move on the geopolitical stage.
Silver sold off sharply for a second day after it pushed up towards $83 per ounce on Monday.
Morrison said:
Chart-wise, it looks as if silver may have formed a double top, and this may have persuaded many traders to cut their long side exposure and book profits.
At the time of writing, the COMEX gold contract was at $4,438.40 per ounce, down 0.5%, while silver was at $74.365 per ounce, down 4.1%.
Oil climbs
Oil prices climbed more than 2% on Thursday as inventory data boosted sentiment.
US crude oil inventories experienced their most significant drop since late October, falling by 3.83 million barrels over the past week, according to inventory data released by the Energy Information Administration (EIA).
“However, changes on the refined product side were more bearish,” said Warren Patterson, head of commodities strategy at ING Group.
Gasoline and distillate fuel oil stocks both saw increases, according to the EIA, rising by 7.7 million and 5.6 million barrels, respectively.
Patterson said:
These builds reflect refinery run rates holding strong, while implied demand for both products came under some pressure over the last week.
So far, crude oil has been unable to capitalise on its sharp bounce at the beginning of this week.
Sellers have consistently appeared to push prices down, preventing front-month West Texas Intermediate (WTI) crude from sustaining any significant gain above the $58 per barrel mark.
“Despite this, there’s some evidence that support is building around $56, suggesting that the bull-bear battleground is now in a relatively tight $2 range,” Trade Nation’s Morrison said.
Oil prices have fluctuated since the Trump administration authorised the extradition of Nicolas Maduro from Venezuela to the US on criminal charges.
Prices initially rallied, then fell after US President Donald Trump announced Venezuela’s interim authorities would give the US up to 50 million barrels of oil.
Valero and Marathon Petroleum, which can refine Venezuela’s heavy crude, rallied on expectations of potentially unlimited oil shipments.
“The prospect of increased supply continues to outweigh near-term inventory signals, even though it may take many years, and billions of dollars of investment, to rebuild Venezuela’s energy infrastructure,” Morrison added.
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