Commodity wrap: gold jumps, oil plunges on US-Iran peace talks hope

Gold edged up more than 4% on Wednesday as energy prices dropped, easing concerns about higher inflation. 

Silver prices also climbed more than 5% on Wednesday, tracking gold’s rise. 

Meanwhile, oil prices plunged more than 5% at one point during the day as hopes for a peace deal between the US and Iran emerged. 

Base metals, on the other hand, rose due to optimism over peace negotiations between the US and Iran.

Aluminium prices were steady on the London Metal Exchange. 

Gold rebounds

Gold prices climbed by over 4% on Wednesday, driven by easing inflation concerns and reduced expectations of interest rate increases, following a drop in oil prices. 

The lingering uncertainty from the Middle East conflict, however, remained a factor.

Gold briefly surpassed $4,600 this morning before retreating slightly. 

This initial decline in gold's price was attributed to the recent strength of the US dollar.

Amid the turmoil in the Middle East, many investors were taken aback to see the US dollar, not gold, emerge as the preferred safe-haven asset. 

Gold's extreme volatility—a steep rise in late January followed by a sharp drop—had eroded its perception as a reliably solid asset during periods of uncertainty.

“Could this week’s early flush-out now set the stage for a rethink? Well, there’s still plenty of price volatility. But the bulls may be encouraged by the pullback in the dollar and as gold has managed to push back comfortably above $4,400,” said David Morrison, senior market analyst at Trade Nation. 

“On the other hand, many investors are no longer expecting rate cuts this year from the Fed, and some think the next move could be a hike,” Morrison said. 

Silver has extended its winning streak to a third straight session, making a significant rebound after dropping to a four-month low of $61 per ounce on Monday.

Early in the day, silver surged to trade above $74.50 before paring some gains. 

At the time of writing, silver was trading around $73, up nearly 5%, as ongoing diplomatic efforts to resolve the conflict fostered optimism about improved energy supply conditions.

“Monday’s selloff could prove to be the shake-out that silver needed; a move that drove out the weaker holders. If so, then it’s possible that the current rally has some legs, with $80 the next obvious upside target,” Morrison said. 

Oil falls amid peace negotiation possibility

Reports of a 15-point US proposal sent to Iran, reportedly aimed at ending the conflict, sparked discussions of progress toward a ceasefire, sending oil prices down by approximately 4% on Wednesday.

At the time of writing, the price of West Texas Intermediate crude oil was at $90.43 per barrel, down 2.1%, while Brent was down 2.6% at $101.92 per barrel. 

According to reports, the US proposal had been conveyed to Iran via Pakistan.

Reports also added that either Pakistan or Turkey is being considered as a possible location for talks aimed at de-escalating the conflict.

An Iranian military spokesman asserted that the US is "negotiating with itself," while Iran simultaneously denied that any direct talks had occurred.

Uncertainty persisted despite the initial market relief.

Tehran demonstrated a continued hardline stance by launching another round of missiles at Israel and showing minimal desire for negotiation. 

Additionally, Iran reiterated its condition for the transit of foreign ships through the Strait of Hormuz: they must adhere to Tehran's regulations and refrain from acts of aggression.

A bearish American Petroleum Institute inventory report also pressured the oil market.

Contrary to expectations of a modest 190,000 barrel draw, US crude inventories actually increased by 2.3 million barrels last week. Furthermore, gasoline stocks rose by 0.5 million barrels, while distillate inventories rose by 1.4 million barrels. 

“Overall, volatility remains elevated and a geopolitical risk premium persists,” Warren Patterson, head of commodities strategy at ING Group, said in a note. 

“Ongoing tensions continue to support higher prices, stoke inflation concerns, and reinforce expectations that policymakers may delay easing, or even tighten, monetary policy.”

Base metals rise

Base metal prices opened higher, continuing Tuesday’s rebound as geopolitical tensions in the Middle East stabilised instead of escalating. 

Copper, specifically, found support for a move back to the low $12,000s amid improved risk appetite.

However, given the ongoing conflict, the market remains highly susceptible to volatility and news headlines.

The tightening supply of copper scrap in China is subtly boosting micro-level demand for refined copper. 

With scrap sometimes trading at a premium to refined metal, fabricators are shifting their purchases back to the refined market. 

This shift has led to the year's largest weekly inventory draw, and further stock reductions are anticipated as smelters enter seasonal maintenance.

Meanwhile, aluminium is the outlier this morning as the only base metal on the board in negative territory.

However, prices were largely unchanged at the time of writing. 

Goldman Sachs anticipates that aluminium prices will hover around $3,200 in the second quarter and average $3,100 for 2026.

This forecast factors in potential supply disruptions, such as those near the Strait of Hormuz, as well as recent price surges. 

However, the bank projected that war-related supply losses will be largely compensated by a dip in global demand.

Further upward price movement is expected to be limited due to substantial speculative holdings and continued production growth in China.

The three-month copper contract on the London Metal Exchange was at $12,342.70 per ton, up 2.3%, while aluminium was nearly flat at $3,246.90 a ton. 

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