Gold prices edged up on Tuesday, trading around 1,757 an ounce, amid concerns over high inflation and worries that soaring energy prices could hurt economic growth. Meantime, the yield on the benchmark US 10-year Treasury rose to above 1.6% on Friday, the highest in 4 months, after news that the US economy added 194 thousand jobs in September, the least so far this year and largely missed market forecasts of 500 thousand. Market participants now await the minutes of the US Federal Reserve's September policy meeting and the country's consumer price index later this week.
WTI crude futures traded around $80.4 a barrel on Tuesday after hitting above $81 a barrel for the first time since October 2014 in the prior session and following seven consecutive weeks of gains, amid expectations that tight supply and strong demand could continue to support prices in the near term. Oil has benefitted from the soaring prices of natural gas and coal, making it more attractive as a fuel for power generation. At the same time, OPEC+ decided last week to maintain a steady and gradual increase in production.
Gasoline increased to a 7-year high of $2.383 per gallon, amid lingering supply disruptions and prospects of strong demand. Oil production still lagged behind pre-hurricane levels at some US Gulf platforms, with Royal Dutch Shell warning that the damage to offshore transfer facilities is expected to curb production until early 2022. At the same time, demand came back stronger than expected, with Americans driving at rates nearly 50% above their pre-pandemic level, according to Apple's mobility index.
Heating oil futures were above $2.5 a gallon, close to levels last seen in November 2014, tracking oil prices higher and benefiting from supply disruptions and rising demand ahead of winter in the northern hemisphere. Oil production in the US Gulf platforms is still below the levels they were before Hurricane Ida hit while inventories of US distillates are enough to meet 31.2 days of demand, the tightest for this time of the year since 2000, according to the Energy Information Administration.
Silver, remained under pressure below $23 per troy ounce, consolidating near its lowest level in a year amid reduced industrial demand and expectations of higher interest rates. Bets are growing that the Federal Reserve will start cutting back on its monetary stimulus as soon as November and that a rate hike will follow in 2022, causing a dollar rally and higher yields. At the same time, the global economic recovery from Covid-19 is running out of steam and factory activity weakened due to global production bottlenecks and energy shortages. The white metal reached an 8-year peak of $30/oz in February on prospects that a global shift towards green technologies, such as solar panel production, would boost demand, but has since declined more than 20%.
Copper futures consolidated close to $4.3 per pound, as volatility in the markets calmed following developments in the US debt ceiling impasse. Senate minority leader Mitch McConnel consented to temporarily raising the federal government’s $28.4 trillion debt ceiling, avoiding a default risk. Support also came from Glencore’s announcement saying it didn’t plan on executing a mining project in Peru until 2023, reacting to local protests. Still, the metal is trading 13% below a record high of $4.9 per pound hit on May 10th, pressured by a stronger greenback and macroeconomic uncertainty, mostly fueled by soaring energy prices, which have significantly impacted China and Europe.