Commodity wrap: Federal Reserve decision and trade talks boost oil, gold prices

Gold prices rebounded on Wednesday after sliding below $4,000 per ounce earlier this week. 

Silver prices also followed gold’s rise as the metal rose more than 2%. 

Meanwhile, oil prices were in the green on Wednesday on optimism over greater demand for the black liquid. 

Gold rebounds

Gold prices climbed almost 2% on Wednesday, recovering from a three-week low reached in the prior session. 

This rise was attributed to some traders covering short positions in anticipation of a key Federal Reserve rate decision scheduled for later the same day.

With a US government shutdown limiting economic data, the Federal Reserve is anticipated to reduce interest rates by 25 basis points. 

This decision follows September’s softer-than-expected inflation figures and indicators of a weakening labour market.

Powell’s remarks will be closely watched by investors for any indications regarding future policy.

Gold, a non-yielding asset, generally performs well when interest rates are low and economic conditions are uncertain.

Meanwhile, US President Donald Trump announced a trade deal with South Korea on Wednesday.

He also expressed optimism about a similar agreement with China’s Xi Jinping, prior to their scheduled talks on Thursday.

“The gold market is quite volatile at present,” said David Morrison, senior market analyst at Trade Nation.

And it is likely to remain so, certainly until we hear from the US Federal Reserve tonight, along with any trade deal that Presidents Trump and Xi Jinping may reach on Thursday.

At the time of writing, the COMEX gold contract was at $4,025.76 per ounce, up 1.1% from the previous close. 

Silver rises

Additionally, silver prices on COMEX rose 2% to trade at $48.230 per ounce on Wednesday. 

Silver rebounded after reaching a low of $45.55 on Tuesday morning with the opening of European markets, as buyers re-entered.

“Like gold, it has built on those gains today, and, at the time of writing, was up close to 6% from Tuesday’s lows,” Morrison said. 

Given the severity and steepness of the selloff from record highs, a rebound appeared probable, according to Morrison.

But it is too early to sound the ‘all clear’ for the bulls. Silver may need to find a more significant area of support if it is to launch another attack on all-time highs. 

Oil prices climb

Oil prices remained stable on Wednesday, before climbing sharply as the day progressed. 

This stability comes as investors consider two opposing factors: optimism surrounding a meeting between the leaders of major oil-consuming nations, the US and China, and the anticipation of higher production quotas from the upcoming OPEC+ meeting.

US President Donald Trump and Chinese President Xi Jinping are scheduled to meet on Thursday in Busan, South Korea, according to China’s foreign ministry.

Beijing anticipates the upcoming meeting will “inject new momentum into the development of US-China relations” and is prepared to collaborate for “positive outcomes.”

China expressed willingness to continue cooperating with the US on fentanyl.

This statement followed Trump’s expectation to lower tariffs on Chinese products in return for Beijing’s promise to restrict the export of precursor chemicals.

US crude and fuel inventories were expected to decline last week, which also helped support prices. 

According to American Petroleum Institute figures, crude stocks decreased by 4.02 million barrels for the week ending October 24.

Additionally, discussions within the Organization of the Petroleum Exporting Countries and allies, the world’s largest oil-producing group, about a potential output increase contributed to price declines in oil in the previous session.

According to reports, OPEC+ may lean towards a modest output boost in December, with some suggesting an additional 137,000 barrels per day.

At the time of writing, the West Texas Intermediate crude was at $60.73 per barrel, up 1%, while Brent was 0.9% higher at $64.42 a barrel. 

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