Commodity Roundup: Oil set for third monthly gain; gold eyes best month since Oct.

Crude oil prices headed for their longest streak of monthly advances since September last year, supported by supply side issues ahead of the OPEC’s ministerial monitoring committee meeting next week, while a lack of a ceasefire between Israel and Hamas continued to keep tensions in the Middle East elevated, further supporting prices.

Israel’s air force on Wednesday continued to pound the Gaza Strip with strikes, and Hamas fighters kept up attacks against Israeli soldiers, a further indication that a United Nations Security Council resolution this week calling for a cease-fire had failed to persuade either side as attempts for an agreement appeared to falter.

Crude oil futures have advanced on Middle East concerns and expectations of a tight market backed by supply cuts by OPEC and allies. Brent futures are up 4.26% so far this month, with WTI up 4.10%.

Gold prices too were aiming for a monthly gain, its biggest since October last year, on bets that the U.S. Federal Reserve would begin cutting interest rates in June.

Looking at the physical market, the Reserve Bank of India bought 8.7 tonnes of gold in January, making it the largest purchase by the central bank since July 2022. The RBI’s gold holding has climbed to 812.3 tonnes in January, from 803.58 tonnes in December 2023, according to the World Gold Council data.

However, Commerzbank in its latest note said, while the price of gold has reached a new record high, the rise since the beginning of the month “remains a mystery”, and therefore, the brokerage sees limited further upside potential.

However, it is unlikely that prices will fall back to the levels seen at the end of February, as the Fed is expected to cut interest rates from June, which should support gold, Commerzbank analysts said.

Turning to base metals, brokerage ANZ said, it expects an oversupplied nickel market over the next two to three years, “but a tighter market is not out of the question.” It further adds, that $16,000/t is unsustainable over the medium term and looks for a bounce in the coming months. Sets 12-month price target of $18,000/t.

The brokerage says, the base metals sector is set to benefit from stabilizing growth and increased infrastructure investments in China. “Lithium, cobalt, and nickel look likely to remain oversupplied in the short term, but the response from producers in cutting output amid the low prices should limit the downside.”

Recent Commodity Price Movements and A look At Some ETFs