Oil, Gold Down amid Middle East Tensions
Trading in the commodities market eased on Tuesday despite ongoing geopolitical tensions in the Middle East.
Oil prices pared gains, with Brent crude futures shedding 0.6% to $68.47 a barrel. The US West Texas Intermediate (WTI) futures losing 0.5% to $62.94 a barrel.
Both benchmarks received a boost on Monday, with Brent soaring to a high of $70.74.
Energy commodities also strengthened this week due to increased compliance of the members of the Organization of the Petroleum Exporting Countries (OPEC) on the following output quota limits focused on lowering supply.
Investors’ attention is to turn to the American Petroleum Institute’s (API) snapshot of US crude stockpiles later in the day.
The latest API data revealed that oil inventories dropped by 7.9 million barrels last week.
Gold prices, meanwhile, retreated from a six-year high on Tuesday.
Spot gold rose 0.02% to $1,566.11 per troy ounce, while gold futures slipped 0.05% to $1,567.95.
Gold has climbed more than 2% in the past two days. The heightened conflict between the two countries triggered a knee-jerk reaction on the precious metals.
Commodities to Remain Cautious on Middle East Tensions
Geopolitical tensions in the Middle East remain centre stage. The markets were clearly in wait-and-see mode, according to the director of economics and markets Tapas Strickland.
Iraqi lawmakers have voted on Sunday in favour of expelling some 5,000 US soldiers from the region. This was a response to the killing of Iranian Major-General Qassem Soleimani in Baghdad last week.
US President Trump has threatened to employ sanctions should it proceed to remove the US troops stationed there.
The US has ordered more troops to the Middle East after Iran’s Supreme Leader Ayatollah Ali Khamenei vowed to retaliate.
Commodities analyst Will Sungchil Yun said the market is recovering from the initial shock, closely monitoring how Tehran will respond.
As current signals indicate, traders and investors do not see a full-blown war coming. And prices are likely to remain relatively steady without significant development, Yun added.
Facing public pressure to avenge Soleimani, the Iranian parliament passed a bill raising the budget of its elite Quds force. The force was headed by Soleimani. The increase would be €200 million over the next two months.
Before the budget increase announcement, the country said it would no longer comply with the uranium enrichment limits imposed on the 2015 nuclear deal.
