Most major commodities took a breather on Wednesday as gold, crude and silver prices were in the red.
Gold investors were cautious ahead of the outcome of the two-day policy meeting of the US Federal Reserve later on Wednesday.
Oil retreated as well as the market assessed the impact of geopolitical tensions in Ukraine and the Middle East.
Both copper and aluminium prices eased on Wednesday after strong gains earlier this week.
Oil slips
Crude oil prices saw a slight dip on Wednesday, following a more than 1% increase in the prior session.
Nevertheless, persistent geopolitical tensions lent support to the market, as traders anticipated an expected interest rate cut from the US Federal Reserve later in the day.
In the previous trading session, benchmarks rose over 1% amid worries that Ukrainian attacks could disrupt Russian supplies.
Russia will not be affected by the European Union’s accelerated plans to phase out Russian energy and commodities, Kremlin spokesperson Dmitry Peskov said on Wednesday.
The EU continues to import billions of euros in Russian energy and commodities, including liquefied natural gas and enriched uranium, despite existing sanctions.
This comes even as its imports of Russian oil and gas have sharply decreased.
Investors are awaiting the results of the Federal Reserve’s September 16–17 meeting.
Stephen Miran, a new governor on leave from the Trump administration, is participating in these deliberations.
At the time of writing, the price of West Texas Intermediate crude oil was at $64.04 per barrel, down 0.7% from the previous close.
Brent crude was also 0.7% lower at $67.97 a barrel.
“Today’s retracement could reflect positioning ahead of the delayed weekly inventory report, which is expected to show another build in US stockpiles,” said David Morrison, senior market analyst at Trade Nation.
But in the bigger picture, the global market remains well supplied, while demand growth continues to slow.
Gold retreats from record highs
Gold prices hit record highs in the last session on Tuesday. However, prices have slipped on Wednesday as the dollar gained ground.
A stronger dollar makes commodities priced in the greenback more expensive for holders of other currencies.
After reaching a two-month low on Tuesday, the dollar rose by 0.2%, making gold, priced in the greenback, more expensive for international purchasers.
Gold’s relative strength index (RSI) dropped to 75 after reaching a more than 17-month high of 81 on Tuesday.
This indicates the metal was overbought.
All eyes are on the US central bank, which is anticipated to implement a quarter-percentage-point rate cut today.
US Fed Chair Jerome Powell’s remarks will be scrutinised for indications regarding the future trajectory of interest rates.
Meanwhile, Goldman Sachs predicted that gold could reach $5,000, driven by central bank purchases and ETF inflows.
This projection is contingent on even a small portion of private Treasury holdings shifting into gold.
At the time of writing, the December gold contract was at $3,705 per ounce, down 0.5%.
Silver prices on COMEX also slipped more than 2%, and were trading at $41.923 per ounce.
Base metals
Both copper and aluminium three-month contracts on the London Metal Exchange fell more than 1% on Wednesday.
The base metals had enjoyed a relatively positive week until Wednesday.
Copper prices, after reaching a 15-month high on Monday, have experienced slight profit-taking today in anticipation of tonight’s crucial Federal Reserve meeting.
“Aluminium, meanwhile, continues to show signs of physical tightness, with backwardation in short-term spreads supporting prices near six-month highs,” Neil Welsh, head of metals at FCA regulated multi-asset brokerage Britannia Global Markets, said in an emailed commentary.
The broader base metals complex remains largely stable as traders await the Fed’s clarity, according to Welsh.
This includes not only the anticipated 25 basis point rate cut, which the CME FedWatch tool currently predicts with 96% certainty, but also, and more crucially, insights into the future direction and tone of monetary policy.
“With the dollar already down around 10% year-to-date and labour data softening, traders are looking for signals that tonight’s cut could be the first in a series,” Welsh added.
The tone of Powell’s press conference will be scrutinised for any hint of acceleration in easing, which would be supportive for metals and broader commodity demand.
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