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Precious metals advanced after the FOMC

Highlights:

  • ENERGY:
    Brent crude slid by 0.3% or 24 cents, to $75.95 a barrel. WTI crude yielded 0.4% or 28 cents, to $71.95 a barrel.
    So far this month, natural gas prices in Europe jumped by 40% to close to $25 per mmBtu.
  • METALS:
    Spot gold increased by 0.3% at $1,772.62 while US gold futures fell by 0.3% to $1,773.80.
    Silver futures for December delivery on Comex was trading with an increase of $0.499 at $23.115 an ounce.
    Three-month copper on the LME slipped by 0.1% to $9,274 a tonne. 
  • AGRICULTURAL:
    The most active corn contract on the CBOT slipped by 0.3% at $5.23-3/4 a bushel.
    Soybeans expanded by 0.4% to $12.87-1/2 a bushel.

Oil continues to attract buyers after the dips

Oil prices decreased but remained above $75 a barrel. Crude prices have been supported by increasing demand and halted production in the Gulf of Mexico. 

Brent crude slid by 0.3% or 24 cents, to $75.95 a barrel. WTI crude yielded 0.4% or 28 cents, to $71.95 a barrel.

Earlier in the session, Brent crude soared to $76.53 a barrel, the highest level since mid-July.

Both contracts surged by 2.5% on Wednesday following a report from the US Energy Information Administration. It showed that crude stocks slumped by 3.5 million barrels to 414 million, the lowest level since October 2018.

Several OPEC+ member countries, including Nigeria, Kazakhstan, and Angola, have struggled to raise output. Iraq’s Oil Minister stated that OPEC+ was working to keep crude prices near $70 a barrel as the global economy recovers. The group will hold a meeting on October 4. 

 

What is behind the steady increase in the price of gas?

Recovery after the pandemic crisis seems closer and closer. The vaccination rate in most large economies is supporting economic recovery. But along with this reestablishment, a continuous rise in gas prices seems to become a serious issue for most countries. 

The Covid-19 crisis significantly affected the oil and gas industry. The large producers reduced their production due to the historic low demand. The world has resumed its industrial activities and energy consumption, but production is still far from pre-Covid-19 levels.

 

Analysts explain the spike in gas prices as a rebound effect. During 2020, the main energy sources were sold at prices not seen for years, generated by an excess of supply and little demand. Now, the reverse happens. Supply has recovered, even exceeded in some Asian economies, but producers still have not returned to the pace they had before the pandemic.

 

Gold and silver rose after the Fed meeting

Spot gold increased by 0.3% at $1,772.62 while US gold futures fell by 0.3% to $1,773.80. Silver futures for December delivery on Comex was trading with an increase of $0.499 at $23.115 an ounce.

Gold has been trading volatile after the US Fed president confirmed that the institution will gradually withdraw its bond purchase program and will not raise interest rates for the time being. The markets were aware of the Fed meeting and the path that US monetary policy was going to take in the near future.

Jerome Powell confirmed after the meeting that the tapering of the asset purchase program, worth $120,000 million, will begin very soon. It launched in 2020 to ease the effects of the pandemic.

Powell further clarified that the tapering would be very gradual and it could be extended until the middle of next year.

Powell also pointed out that the Fed has the power to speed up or slow down the process of withdrawing aid. This will depend on the US economy making substantial progress. 

 

Copper dropped again on worries of slowing recovery

Three-month copper on the LME slipped by 0.1% to $9,274 a tonne. Meanwhile, the copper futures contract for October delivery on the Shanghai Futures Exchange settled almost flat at 68,660 yuan a tonne. 

Red metal prices were under pressure due to the concerns about slowing recovery in the US after the Fed stated that the tapering would start earlier than expected. 

However, industrial metals were buoyed by optimism that China, the largest market, can avoid the damaging collapse of one of its biggest real estate developers, Evergrande.

 

Corn eased after Wednesday’s rally

Chicago corn futures dropped on Thursday. The most active corn contract on the CBOT slipped by 0.3% at $5.23-3/4 a bushel. Expectations of large supplies from freshly harvested crops weighed on the prices.

Meanwhile, soybeans prices increased. Soybeans expanded by 0.4% to $12.87-1/2 a bushel.

 

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