The see-saw in the oil market continued on Tuesday as prices jumped more than 3% amid uncertainty in peace negotiations between the US and Iran.
Gold prices fell on Tuesday, pressured by rising oil prices, higher inflation concerns, and prospects of increased global interest rates following fading hopes for an Iran peace deal.
Meanwhile, copper climbed above $14,000 per ton on the London Metal Exchange, while aluminium was near $3,600 per ton on Tuesday.
The three-month copper contract on the LME was 1% higher at $14,028 per ton.
Oil surges
Supply concerns resurfaced, driving oil prices up by over 3% on Tuesday.
This increase was fueled by the significant policy disagreements between the US and Iran regarding a proposed resolution to the ongoing conflict in the Middle East.
At the time of writing, the West Texas Intermediate crude oil was at $101.89 per barrel, up 3.9%, while Brent was at $107.77 per barrel, up 3.4% from the previous close.
“After both sides rejected each other’s negotiation proposals, tensions between Iran and the US are escalating once more,” said Commerzbank analyst Carsten Fritsch.
US President Donald Trump stated on Monday that the ceasefire was in a precarious state, claiming it was on “life support.”
This was attributed to ongoing disagreements, specifically over Iran’s demands, which include: a complete end to hostilities on all fronts, the removal of a US naval blockade, the ability to resume Iranian oil sales, and compensation for war damages.
Adding to the tensions, Iran reasserted its sovereign control over the Strait of Hormuz.
This strait is a crucial chokepoint, normally facilitating the passage of about one-fifth of the world’s oil and liquefied natural gas.
As a consequence of the Strait’s near-closure, producers have been forced to cut back on exports.
A Reuters survey released on Monday confirmed the impact, showing that OPEC’s oil output in April had fallen to its lowest level in over two decades.
On Monday, Saudi Aramco CEO Amin Nasser issued a warning that obstacles to oil exports via the strait could push back the return to market stability until 2027.
This disruption, he noted, would result in a weekly loss of approximately 100 million barrels of oil.
Gold, silver fall
The outlook for higher global interest rates, coupled with rising oil prices—fueled by diminishing prospects for an Iran peace deal—pushed gold prices lower on Tuesday due to increasing inflation concerns.
US consumer prices climbed for a second consecutive month in April, marking the largest yearly jump in inflation in almost three years.
This data reinforces the widespread expectation that the Federal Reserve will maintain current interest rates for an extended period.
Despite gold’s reputation as an inflation hedge, the prospect of prolonged higher interest rates tends to exert downward pressure on the non-yielding asset.
Attention is also focused on two other key events: the release of the Producer Price Index (PPI) on Wednesday, and a meeting between President Trump and Chinese President Xi Jinping in Beijing, which is set to take place from Thursday to Friday.
“Despite the recovery in oil prices, gold has almost managed to hold on to the gains made in recent days,” Barbara Lambrecht, commodity analyst at Commerzbank AG, said in a report.
Meanwhile, silver prices held above $85 per ounce, even with rising oil prices.
The impulse for the relative strength of silver, which is more heavily influenced by industrial demand than gold, is likely to stem from the industrial metals markets.
At the time of writing, gold on COMEX was at $4,689.62 per ounce, down 0.9% from the previous close.
In other news, Indian banks have resumed the import of gold and silver, ending a more than a month-long pause.
The halt in shipments was previously triggered by the imposition of a 3% customs levy, which the banks have now agreed to pay, according to Reuters sources.
The Indian jewellery industry is concerned about a potential decrease in demand, which is vital for the physical gold market.
This worry stems from a recent call by Prime Minister Narendra Modi for citizens to avoid buying gold for at least a year to help safeguard the country’s foreign exchange reserves.
Despite a near 20% drop in gold jewellery tonnage purchased in Q1 year-over-year, India’s expenditure on gold reached an all-time high for the first quarter due to elevated prices.
Gold remains India’s second-largest import by value after energy.
“It remains to be seen whether the appeal will have any effect. If not, the government could raise import duties again,” Lambrecht added.
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