Profit-Taking, Stronger Dollar Cool Hot Commodities

Profit-taking, the stronger U.S. Dollar and government data weighed on the commodity markets on Thursday leading to lower closes in natural gas, crude oil, gold and copper. While it’s too early to suggest a change in trend may be taking place after strong performances in most commodities this week, it does indicate there are factors influencing prices other than supply issues.

Commodities have been a hot topic this week, particularly crude oil and base metals. Traders are saying that threats of a trade war and continued signs of global growth may be combining to create opportunities investors haven’t seen in a number of years.

While geopolitical turmoil and market volatility may be putting pressure on the stock market, it may be helping to boost interest in the commodities market, which has suffered for years, pressured by slow economic growth and stubbornly low inflation.

Gold

Gold prices edged lower on Thursday, ending four days of successive gains, in response to rising U.S. Treasury yields, a firmer U.S. Dollar and the easing of geopolitical tensions.

June Comex Gold futures settled at $1348.80, down $4.70 or -0.35%.

Gold fell in response to rising Treasury yields because the precious metal is a non-interest bearing instrument. Additionally, the boost in interest rates helped make the U.S. Dollar a more attractive investment. This pressured foreign demand for gold because it is a dollar-denominated investment.

The easing of geopolitical tensions were fueled by President Trump’s upcoming summit with North Korean leader Kim Jong Un, the news that the Western missile strikes in Syria last week-end were less extensive than some had feared, and the delay by the Trump Administration of additional sanctions on Russia.

Copper

Copper prices were dragged down by a stronger U.S. Dollar, which made dollar-denominated copper a less-desirable asset, and weaker aluminum and nickel prices. After soaring to multi-year highs on fears over the impact of U.S. sanctions on Russian companies, aluminum and nickel prices retreated due to overbought conditions.

July Comex High Grade Copper settled at $3.1540, down $0.0275 or -0.86%.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil finished lower on Thursday, driven by profit-taking, a rising U.S. Dollar and higher interest rates.

June WTI crude oil settled at $68.33, down $0.14 or -0.20% and June Brent crude oil closed at $73.78, up $0.30 or +0.41%.

Early in the session, crude oil extended its gains from the previous session, which came after the U.S. Energy Information Administration reported U.S. crude stockpiles fell by 1.1 million barrels last week.

Despite the potentially bearish technical closing price reversal chart pattern, the market is likely to continue to be underpinned by the reimposition of sanctions on Iraq and the deteriorating situation in OPEC-member Venezuela. Both situations should lead to supply disruptions.

Additionally, the gap between supply and demand in the oil market has tightened as OPEC, Russia and other producers have nearly achieved their aim of shrinking global crude stockpiles to the five-year average.

Natural Gas

Despite a potentially bullish government storage report, natural gas futures plunged on Thursday as investors failed to react to a bigger-than-expected drawdown. The move suggests that traders perceived the news as stale and that improving weather conditions should eventually lead to an increase of natural gas in storage.

June Natural Gas futures settled at $2.695, down $0.073 or -2.64%.