SINGAPORE: Prices of commodities, from silver and gold to crude oil and copper, dived on Thursday, as global tensions eased after a telephone call between the leaders of China and the United States, which is also set for talks with Iran this week.
Silver plunged almost 15% while gold, crude oil and copper fell about 2% as investors pared positions on a strengthening US dollar, in which all commodities are priced.
“We saw extreme volatility in precious metals and other commodities this week, and what we are witnessing today are some aftershocks,” said Tony Sycamore, an analyst at broker IG.
“Talks between Iran and the United States appear to be back on track, which has removed some of the geopolitical premium from commodity markets, particularly oil,” he added.
“Following the call between Trump and Xi, tensions on the trade front have also eased. Investors are inclined to sell gold at these levels.”
The dollar steadied at the start of Asian trade ahead of interest rate decisions from the European Central Bank and the Bank of England, which are both expected to keep rates on hold later in the day.
The US dollar index of the greenback’s strength against a basket of six currencies traded near a two-week high. A stronger dollar makes commodities expensive for buyers who hold other currencies.
Prices fell on Monday after US President Donald Trump nominated Kevin Warsh as the next Fed chair, sparking risk-asset selling.
A hawkish US central bank outlook boosts the dollar and raises opportunity costs for gold and silver, reducing their appeal.
Volatile commodities
Spot gold retreated from a near one-week high earlier in the session, and spot silver plummeted. Last week, gold climbed to a record high of $5,594.82 an ounce and silver to an all-time high of $121.64.
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“Sentiment (has) turned soggy across most asset classes, with losses feeding into one another and creating a self-reinforcing feedback loop amid thin market liquidity,” said Christopher Wong, a strategist at OCBC.
Such expectations were reflected in precious metals, cryptocurrencies and regional equities, he added.
Oil prices , fell about 2% after the US and Iran agreed to hold talks in Oman on Friday, allaying fears that a military conflict could disrupt supply from the key Middle East producing region.
Copper faced additional pressure from worries over demand and rising stocks in warehouses registered with the London Metal Exchange.
The metal widely used in construction had previously rebounded from a two-session slump, supported by China’s plan to expand its copper strategic reserves.
Soybeans bucked the trend, climbing to a two-month high, boosted by Trump’s comment that China is considering buying cargoes from the United States.
Iron ore also fell 2%, weighed down by high inventories.
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