Market News

Commodities on the Climb

April 3, 2024

It is early days in the month of April though already we have seen moves of significance for some key commodity prices. Conditions have been ripe for the likes of gold and oil to ascend, with the former notching up yet another record high while the latter has breached multi-month highs. And escalating geopolitical tensions has played a role in both cases.

The spot gold price has moved above the $2280 level for the first time in history. During Asian trading hours on Wednesday the precious metal made its way to the $2285 region, with investors seeking out safe haven assets given the rising tensions around the globe. Hotspots in the Middle East as well as between Russia-Ukraine have added extra momentum to the gold price in a rally which was already being fuelled by constant central bank buying and positioning ahead of an anticipated lower interest rate environment.

With gold having moved past resistance at $2280, the yellow metal is now eyeing off a potential run at the $2300 barrier and perhaps beyond. The price level for spot gold has already surpassed many 2024 forecasts and so now we are left with the big question – how high can it go? On the one hand, it could be viewed as bullish that gold has risen so rapidly despite bond yields and the USD also moving higher. On the other hand, a correction could be on the cards with some overbought readings appearing after this latest breakout move higher. In any event, it is probably fair to say that there will be some upward revisions as to gold’s potential ceiling in 2024. The extent of safe-haven demand and the path of US macro data in coming months are shaping as key determinants for gold price levels.

The oil price has moved into the mid $80’s for the WTI contract on the back of escalatory events in Gaza, Syria, and Russian oil refineries. Recent geopolitical events have injected additional risk-premium into the oil market with traders seeing a greater chance of supply disruptions if the current conflicts maintain their current trajectories. WTI crude was seen trading around the $85 per barrel level during Wednesday trading (Asian market hours). Whether we see escalation of de-escalation in the current conflicts around the globe could swing the oil price either towards $90 or back down to $80 depending on how things play out.

In FX, the USD is riding high on the back of the stronger manufacturing figures (released at the backend of last week). The DXY (Dollar Index) touched the 105 level with investors wondering just how inclined the FOMC may be to cut rates in June given the robust nature of recent economic indicators. And of course, on Friday we will see the next key barometer of US economic health in the form of Non-Farm Payroll (NFP) figures for March. NFP numbers have had a knack for surprising on the upside and if this trend continues, those June rate cut expectations for the FOMC may take another hit.

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