By Gold prices hit another record high on Tuesday the metal breached the $3,700 per ounce for the first time ever.
Crude oil prices were also higher by more than 1.5% as the conflict in the Middle East escalated after the Israeli military announced it had attacked Hamas leadership in Doha, the capital of Qatar.
Silver prices were slightly lower, while the three-month copper contract on the London Metal Exchange was largely flat.
Gold breaches new level
On Tuesday, gold prices reached an unprecedented high, comfortably surpassing the $3,700 mark.
This surge was primarily driven by increasing speculation of a US interest rate cut, which consequently weakened the dollar and lowered bond yields, thereby elevating the demand for the precious metal.
Gold prices have surged, gaining 39% this year on the heels of a 27% increase in 2024.
This growth is attributed to several factors: a weaker dollar, significant central bank gold accumulation, accommodating monetary policies, and elevated global uncertainty.
“Speculation about US interest rate cuts is the main driver behind this increase,” Thu Lan Nguyen, head of FX and commodity research at Commerzbank AG, said in a report.
Gold became more appealing to holders of other currencies as the dollar index dropped to its lowest point in almost seven weeks against other major currencies.
Simultaneously, benchmark US 10-year Treasury yields remained near five-month lows.
According to CME Group’s FedWatch tool, traders are anticipating a Federal Reserve rate cut next week.
There’s an 88% chance of a 25-basis-point reduction and a 12% probability of a larger 50-basis-point cut.
US job growth significantly declined in August, as indicated by Friday’s data.
Consumer price increases due to US tariffs have been milder than anticipated, leading many to expect this gradual rise to continue.
However, inflation figures showing a much stronger price surge could trigger a significant market correction.
Nguyen said:
If, on the other hand, they turn out to be surprisingly weak, the market is likely to bet more heavily on a 50-basis-point interest rate hike, pushing gold further upward.
Crude extends gains
Oil prices extended gains as the conflict in the Middle East intensified, which raised fears of supply disruptions.
The Middle East sits on more than half of the world’s oil reserves, making it vulnerable to geopolitical tensions.
At the time of writing, the West Texas Intermediate crude oil on the New York Mercantile Exchange was at $63.14 per barrel, up 1.4%, while Brent crude on the Intercontinental Exchange was also up 1.4% at $66.99 a barrel.
Both contracts were already trading higher.
This was supported by a smaller-than-anticipated oil output increase from OPEC+, expectations of continued oil stockpiling by China, and concerns about potential new sanctions against Russia.
Meanwhile, Saudi Aramco, Saudi Arabia’s state producer, is expected to cut prices for most of its crude grades for Asian and other buyers next month.
This includes a potential $1/bbl reduction for its benchmark Arab Light crude for October shipments to its largest market, reversing the price increase seen in September, according to a recent Bloomberg report.
For September loadings to Asia, Saudi Arabia increased its official selling price for Arab Light to $3.20/bbl, a rise from August’s $2.20/bbl.
Base metals
Aluminium cancelled warrants surged on Monday by 32,000 tonnes to 42,850 tonnes, marking the highest level since June 5, 2025, according to the latest LME data.
This represents the largest intraday increase reported since January 7, 2025.
Cancellations predominantly originate from Malaysian warehouses.
Nevertheless, cancelled warrants now constitute approximately 9% of total LME inventories, a significant decrease from 54% at the year’s outset.
This decline is largely attributable to subdued physical demand observed throughout the first two quarters of the year, analysts at ING Group said.
Meanwhile, copper prices dropped below $10,000 per ton on Friday.
This decline was attributed to weak US labor market data, which raised economic and demand concerns, overriding short-term expectations for rapid interest rate cuts.
Copper prices were, however, in the green this morning due to a new report. Operations at Indonesia’s Grasberg Mine, the world’s second-largest copper mine, have been suspended following an incident.
The extent and sustainability of the damage is still unclear.
At the time of writing, the LME copper contract was at $9,917 per ton, while the three-month aluminium contract was at $2,625 per ton, up 0.4% from the previous close.
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