Gold prices rose on Friday, and headed for its fifth straight weekly gain on the back of the US Federal Reserve cutting interest rates earlier this week.
Meanwhile, oil prices fell into bear territory as concerns about demand outweighed optimism from the interest rate cut in the US.
Elsewhere, copper prices rose on Friday on expectations of a more dovish US central bank in the long-term.
Gold continues to fly
Gold prices have surged by nearly $400 since early August, hitting a new peak of just over $3,700 per ounce midweek.
However, prices fell slightly after the Fed meeting.
“On the other hand, a breather was probably urgently needed,” Barbara Lambrecht, commodity analyst at Commerzbank AG, said in a report.
We assume that the momentum has run out for now, even though China’s gold imports from Hong Kong next week could show that Asian gold buyers are gradually “getting used” to the higher price level.
However, as Commerzbank expects more interest rate cuts by the Fed next year than the market does, Lambrecht anticipates even higher prices on the gold market in the long term.
At the time of writing, the December gold contract on COMEX was at $3,693.20 per ounce, up 0.4% from the previous close.
Silver prices on COMEX were 1.2% higher at $42.643 per ounce.
Lower interest rates decrease the opportunity cost of holding non-yielding assets such as gold.
Gold tends to perform well during periods of uncertainty and has gained approximately 39% since the beginning of the year.
Neel Kashkari, President of the Fed Bank of Minneapolis, stated that job market risks justified this week’s rate cut and anticipated reductions at the central bank’s next two meetings.
Oil prices slip
Fuel demand concerns outweighed the anticipation of increased consumption from the US Fed’s first interest rate cut of the year, leading to a drop in oil prices on Friday.
A stronger dollar also weighed on oil prices on Friday. A stronger dollar makes commodities priced in the greenback more expensive for overseas buyers.
US oil prices are being pressured by concerns over demand, following a larger-than-expected 4 million barrel increase in US distillate stockpiles.
This concern is further exacerbated by recent economic data, which indicates a softening US jobs market and a multi-year low in single-family homebuilding in August, attributed to an oversupply of unsold new houses.
“However, prices continue to be supported by the ongoing discussion about extending sanctions against Russian energy exports,” Lambrecht added.
US President Donald Trump indicated potential additional sanctions, particularly if other NATO partners did not buy Russian oil and gas, or if secondary tariffs were also implemented by the US.
While the EU is expected to unveil its 19th sanctions package today, an agreement on this matter appears unlikely in the short term.
However, the EU might signal an accelerated phase-out of remaining Russian energy imports, a process originally scheduled for completion by the end of 2027.
At the time of writing, the price of West Texas Intermediate crude oil was at $63.32 per ounce, down 0.4%. Brent crude was also 0.4% down at $67.19 a barrel.
Copper rises
Despite a stronger dollar, copper prices rose, supported by the prospect of new dovish Fed leadership.
Citi forecasts a cautious end to 2025 for copper, followed by a more significant rally next year to $12,000 per ton, driven by an anticipated recovery in global manufacturing and a weaker US dollar.
Although demand is expected to face challenges in the coming months, it is projected to strengthen next year due to long-awaited supply shortages, according to the bank’s analysts in their latest quarterly commodities outlook.
Citi predict copper will average $10,000 per ton in the fourth quarter, close to its current price.
“For investors and consumers able to weather near-term volatility, we recommend averaging into copper over the next three-six months to capture 20% upside” by the end of 2026, the report said.
At the time of writing, the three-month copper contract on the London Metal Exchange was at $9,985 per ton, up 0.4%.
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