Commodity prices faced broad pressure on Wednesday. Crude oil continued its decline as supply concerns eased with the Strait of Hormuz remaining open. Gold prices fell below $4,000 per ounce, marking a pause in a multi-year bull run. Industrial metals on the London Metal Exchange also slid, pressured by a stronger U.S. dollar and a hawkish Federal Reserve stance.
Crude Oil: Prices Decline as More Tankers Transit Strait
Oil prices extended their losses on Wednesday. Fears of supply shortages eased as progress was reported in peace talks between the U.S. and Iran, and as more tankers openly transited the Strait of Hormuz.
West Texas Intermediate crude fell, settling near $70 per barrel, while the global benchmark Brent crude settled below $74 per barrel.
"Oil is falling sharply as the Strait of Hormuz stays open and traders begin to focus on the potential for OPEC members, including Iran, to shift to maximizing production," said Jay Hatfield, CEO of Infrastructure Capital Management.
"We forecast that WTI could fall below $60 in the coming two months as production rises and inventories rebuild," Hatfield added.
Ships are keeping their satellite signals on while passing through the Strait, indicating increased owner confidence in safe passage through this critical chokepoint.
The International Maritime Organization stated it has received security assurances allowing hundreds of vessels to depart the Persian Gulf.
Both Washington and Tehran have indicated that negotiations aimed at ending the conflict have made initial progress, though the process may be lengthy and contentious.
The International Energy Agency estimates that the United Arab Emirates' current oil exports have recovered to nearly 85% of pre-war levels.
WTI crude for August delivery fell 3.92% to settle at $70.34 per barrel.
Brent crude for August fell 4.33% to settle at $73.74 per barrel.
Precious Metals: Gold Falls Below Key $4,000 Level
The price of gold fell below $4,000 per ounce for the first time since last November. A three-year bull run for the metal appears to have paused, driven by a stronger dollar and heightened expectations for interest rate hikes.
Gold prices dropped as much as 3.8%, falling below $3,960 per ounce. Silver prices fell below $60 per ounce for the first time since last December. The Bloomberg Dollar Spot Index, which measures the U.S. currency's strength, has gained nearly 1% this week, making dollar-priced gold more expensive for buyers using other currencies.
"Gold is clearly trading with market expectations for U.S. rate hikes as Fed Chair Kevin Warsh’s focus on inflation has bolstered expectations for a more hawkish policy," said Darwei Kung, head of commodities at DWS Group.
As of 4:17 p.m. New York time, spot gold was down 3.0% at $3,992.44 per ounce. Silver fell 6.9% to $57.31 per ounce. Palladium and platinum prices also declined.
Base Metals: Copper Leads Industrial Metals Lower
Copper and other industrial metals extended their decline on Wednesday, pressured by a stronger dollar and the Fed's hawkish stance, which weighed on demand prospects.
Investors are increasingly convinced that interest rates will remain elevated, putting pressure on various risk assets. The stronger dollar further exacerbated the negative impact on dollar-denominated commodities.
At the close of London Metal Exchange trading:
LME copper fell 2.1% to $13,086.5 per metric ton.
LME aluminum fell 3.4% to $3,122.5 per metric ton.
LME zinc fell 2% to $3,421.5 per metric ton.
LME nickel fell 2.1% to $16,818 per metric ton.
LME tin fell 2.9% to $49,681 per metric ton.
LME lead fell 1.1% to $1,913 per metric ton.
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