Gold prices bounced back on Tuesday from the previous session’s sharp losses as safe-haven demand boosted the market.
Silver prices rebounded more than 7% after having plunged more than 10% on Monday.
Meanwhile, crude oil extended gains as investors focused on rising geopolitical tensions in the Middle East, which raised fears of lower supply.
Gold rebounds sharply
Gold and other precious metals saw a rebound on Tuesday, recovering from the previous session’s sharp selloff.
The market’s attention has shifted back to the ongoing global risks, which have driven bullion to achieve its most robust annual performance in over four decades.
“Expectations for more Federal Reserve rate cuts in 2026 have lowered real yields, increasing the appeal of non-yielding assets like gold,” Muhammad Umair, founder & financial markets analyst at Gold Predictors, was quoted in a FXstreet report.
Elevated global tensions persist, with the renewed risk of conflict between Russia and Ukraine increasing the demand for safe-haven assets.
Umair said:
Despite a brief margin-driven correction, gold quickly stabilized, showing strong underlying support and confidence in the broader bullish trend.
Gold has seen a remarkable ascent this year, recording its largest annual gain since 1979 at 66%.
This surge is attributed to a confluence of factors, including monetary easing, mounting geopolitical tensions, increased central bank purchases, and a rise in holdings within exchange-traded funds.
The Federal Reserve is scheduled to release the minutes from its December meeting later today.
Currently, market traders are anticipating two interest rate cuts next year, which typically favours non-yielding assets like gold due to the low-interest-rate environment.
Silver soars
Silver saw a 7.1% increase, reaching $75.493 per ounce at the time of writing.
This followed a volatile period, during which the metal hit an all-time high of $83.62 on Monday before experiencing its most significant daily decline since August 2020.
Analysts at Societe Generale attributed this sharp drop partly to the CME Group’s decision on Friday to raise the initial margin requirement for silver futures.
The CME Group raised the security deposit, or initial margin, that traders must maintain for COMEX silver futures.
This requirement increased by 13.6%, moving from $22,000 to $25,000 per contract.
Overall, silver has had an exceptional year, surging 159%. This substantial growth is fueled by factors such as its designation on the US critical minerals list, ongoing supply deficits, and expanding industrial and investor demand.
Despite its current level, silver remains significantly below its inflation-adjusted price peak from 1980, which would equate to $200 per ounce today, according to Alexander Kuptsikevich, analyst at FxPro, said in an analysis.
Although ETF holdings have increased by 150 million ounces this year, they have not yet reached the highs seen in 2021.
Furthermore, the silver-to-gold ratio indicates there is potential for it to decline further, Kuptsikevich said.
Oil extends gains
On Tuesday, oil prices extended gains as investors processed the dimmed prospect of a Russia-Ukraine peace agreement alongside escalating geopolitical instability in the Middle East, particularly concerning Yemen.
The benchmark oil contracts, Brent and West Texas Intermediate, rose by over 2% in the last session.
This surge was driven by two key geopolitical events: airstrikes launched by Saudi Arabia against Yemen, and a separate incident where Moscow accused Kyiv of targeting a Russian presidential residence.
This accusation by Russia, which Kyiv dismissed as baseless and a tactic to derail peace efforts, led Moscow to state it would take a tougher stance in peace negotiations, further dampening hopes for a peace agreement.
Oil prices saw support on Tuesday due to several geopolitical and weather-related supply concerns.
These factors included the ongoing US blockade of Venezuelan oil and poor weather conditions that suspended the export of Caspian CPC Blend.
Further adding to these supply worries were military actions in Yemen.
A Saudi Arabia-led coalition conducted strikes targeting what it claimed was foreign military support for UAE-backed southern separatists.
Following an airstrike by the coalition on the southern Yemeni port of Mukalla, Saudi Arabia declared that its national security was a “red line” and backed a demand for UAE forces to withdraw from Yemen within 24 hours.
Analysts suggest that, despite fresh concerns about possible supply interruptions, the prevailing view of an oversupplied global market will likely limit any price increases.
The post Commodity wrap: gold, silver rebound; oil extends gains on geopolitical tensions appeared first on Invezz
