EUROPEAN COMMODITIES UPDATE: Gold continues to print record highs on lingering uncertainty

Crude Oil: WTI Mar -0.7%,Brent Apr -0.7%

• Another soft morning for the crude complex despite the weak Dollar but after the US and Chinese presidents failed to conduct a call yesterday to discuss tariffs. On that front, US President Trump said he would speak to Chinese President Xi at the appropriate time and is in no rush, while he responded 'that's fine' when asked about China’s retaliatory tariffs.


• On the flip side, US President Trump signed a memorandum regarding maximum pressure on Iran. He said he was torn about signing the memo on Iran and called it very tough. Trump said hopefully they will not have to use it and will see if they can work out a deal with Iran, while he added that Iran cannot have a nuclear weapon and they have the right to block the sale of Iranian oil to other nations but noted he would hold talks with his Iranian counterpart and would reach out to Iran.


• Analysts at ING suggest "This move shouldn’t come as too much of a surprise given that President Trump was hawkish towards Iran during his first term and reimposed oil sanctions against Iran back then. These sanctions were never lifted by Biden, but they were not enforced strictly, particularly after Russia invaded Ukraine. Therefore, stricter enforcement could see as much as 1m b/d of supply at risk. However, reduced flows from Iran will not help in lowering oil prices, something that President Trump is very keen to achieve. He would need to see OPEC increase oil output (something he has already called for) to offset any potential Iranian losses. However, convincing the Saudis and other members to increase output may prove difficult at current price levels."


• Elsewhere, the Chinese Caixin Services PMI disappointed as it missed forecasts, adding further glum to the demand side of the equation.


• Furthermore, prices are not helped mostly by bearish private sector inventory data which showed a larger-than-expected build for crude and gasoline (Crude +5.0mln vs exp. +2.0mln) - traders look ahead for confirmation via the DoEs.


• WTI Mar resides in a USD 72.17-72.97/bbl range and Brent Apr within 75.60-76.34/bbl confines.

Nat Gas: Dutch TTF +1.4%, US nat gas -1.7%

• Mixed trade across gas contacts with Europe moving to storage levels whilst US prices continue to feel pressure from the 1-month deal the US reached with Canada and Mexico to delay tariffs.


• Analysts at ING suggest "The market remains relatively nervous over storage levels and the bigger job Europe will face to refill storage over the injection season." The desk adds "However, one would expect the market to face some resistance around current levels (in the absence of any supply shocks)."

Precious Metals: Gold +1.0%, Silver +1.1%, Palladium +0.4%

• Firm trade seen in precious metals, partly amid the momentum gold has upheld as it prints fresh record highs.


• Desks suggest tariff uncertainty as the likely fundamental drive, whilst technicians focus on the lack of resistance as upward momentum holds.


• Furthermore, geopolitics could be keeping price action underpinned as US President Trump said the US will take over Gaza and all Palestinians should relocate - fanning flames in the region.


• Spot gold has reached levels as high as USD 2,870/oz to the upside (vs USD 2,839.74/oz low) with clean air seen until prices reach round and half-round levels.

Base Metals: 3M LME Copper -0.1%

• Mixed trade in base metals with copper futures rangebound despite the return to the market of its largest buyer as participants also digested disappointing Caixin Services PMI data.


• Macro newsflow has been light this morning, but base metals continue to eye US-Sino relations after the US and Chinese presidents failed to conduct a call yesterday to discuss tariffs. On that front, US President Trump said he would speak to Chinese President Xi at the appropriate time and is in no rush, while he responded 'that's fine' when asked about China’s retaliatory tariffs.


• 3M LME copper resides in a USD 9,151.00-9,209.00/t range. Dalian iron ore futures ended daytime trade -1.0% with traders citing US-China tensions.

05 Feb 2025 - 09:55- MetalsEU Research- Source: Newsquawk