Market Watch: Decline in Gold Prices; Possible Extension on Oil Production Cuts in Saudi and Russia

On November 20, 2023, a downward trend was noted in gold prices, falling to $1,975.76 per ounce at the start of the day due to an uptick in 10-year Treasury yields. This rise in yields reduces the attractiveness of holding non-yielding assets like gold, especially preceding the dissemination of the minutes from the recent Federal Reserve meeting. Traders are also keeping an eye on upcoming U.S. economic indicators.

Energy Sector Overview

In contrast to gold, oil prices saw an increase, with Brent Crude up by over 1%. This uptick is seen as a response to the prospects of the OPEC+ alliance potentially deepening supply cuts to stabilize prices after recent concerns over decreasing demand. Despite a near 20% drop in oil prices since late September and a contango market indicating adequate supply, JPM Commodities Research anticipates that global oil demand growth will slow down. They foresee Saudi Arabia and Russia possibly extending their voluntary production cuts through the first quarter of 2024, maintaining the broader OPEC+ agreed cuts, with a potential reversal of some reductions beginning April 2024.

Base Metals and Agriculture Movements

Copper prices are holding steady, thanks to a weaker dollar and the hopeful measures intended to support the distressed property sector in China. Iron ore gains were sustained for the fourth consecutive week, bolstered by a steel production increase in some Chinese firms. Nonetheless, the steel market shows signs of overall weakness with a 9% year-over-year output drop.

Agricultural commodities presented a mixed picture. Soybean and cocoa prices were on the rise, but wheat futures saw a decline. U.S. pork production estimates for the fourth quarter were adjusted downward in light of expectations of lower dressed weights compared to the previous year.

Recent Price Changes in Commodities

Examining the recent movements in commodity prices, energy sectors like WTI Crude Oil and Natural Gas have seen respective increases and decreases. Palladium, silver, and copper have also experienced shifts in their prices. Among agricultural products, corn, wheat, and soybeans have recorded varying degrees of price changes, reflecting the constant fluctuations in the commodities market.

Commodity-Related Exchange-Traded Funds (ETFs)

In the world of commodity ETFs, gold-focused funds such as SPDR Gold Shares and iShares Gold Trust have taken some hits due to declining gold prices. ETFs associated with other metals, oil, and agriculture reflect the diverse nature of commodities trading, as they too respond to market movements and the overall economic climate.

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