Commodity Roundup: Gold prices dip, oil falls more than 1% on U.S. crude build

Gold prices ticked lower (XAUUSD:CUR) on Wednesday against a stronger dollar, as investors assessed when and by how much the Federal Reserve would cut interest rates this year, while oil prices fell amid rising U.S. stockpiles.

Neel Kashkari’s comments that the Fed will probably hold rates for an extended period and rate hike is not out of the question triggered some selling in gold (XAUUSD:CUR), ANZ Research said in a note.

Meanwhile, China, the world’s biggest consumer of the precious metal, topped up its gold reserves for an 18^th straight month, although the pace of buying slowed. In April, it bought 60koz, down from 160koz in March and 390koz in February. First quarter purchase by the world’s central banks were the strongest on record, the brokerage added.

However, from a technical perspective, the price of gold has broken out from a multi-year consolidation phase, Jan Nieuwenhuijs, a gold analyst at Gainesville Coins wrote, adding that the bullion “was now entering a multi-year bull market.”

Turning to the oil market, both benchmarks were down more than a 1%, as industry data showed a pile-up in U.S. crude and fuel inventories, a sign of weak demand, and cautious supply expectations emerged ahead of an OPEC+ policy meeting next month.

Crude oil futures ticked slightly lower Tuesday after news reports said Russian Deputy Prime Minister Alexander Novak suggested OPEC+ could raise production if warranted by market conditions, as well as other indications of reduced supply concerns.

Elsewhere, natural gas prices were trading higher, supported by a fall in production and increase in feedgas to LNG export facilities.

ING analysts say, the U.S. natural gas market appears to have found a floor. Front-month Henry Hub futures traded to a low of $1.48/MMBtu in March, the lowest level since 2020. However, prices have rallied back above $2/MMBtu since, with the prospect of flat supply growth this year and stronger demand for 2024 and 2025.

“While we expect U.S. natural gas prices to trend higher, there are risks to this view, mainly due to comfortable storage levels and the potential for associated gas production surprising to the upside,” the brokerage added.

The broader weakness in the global gas and LNG market has seen more price-sensitive buyers in Asia returning after the high price and volatile environment in 2022 and parts of 2023, Warren Patterson, Head of Commodities Strategy at ING added.

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