Oil prices fell more than 2% on Tuesday as oversupply concerns and escalating tensions between the US and China weighed on sentiments.
Meanwhile, gold prices extended its rally above the $4,100 per ounce mark on expectations of interest rate cut by the US Federal Reserve.
Lower interest rates increase the appeal of non-yielding commodities such as gold and silver.
Silver prices gave up most of its gains from earlier in the day, and were trading just above the crucial level of $50 per ounce.
On the other hand, copper fell sharply due to trade tensions between the US and China, which is likely to lower demand in the two biggest copper markets.
Oil slips
Tuesday saw oil prices decline, reversing earlier gains.
This downturn was attributed to ongoing trade tensions between the US and China, the world’s leading economies, and a warning from the International Energy Agency (IEA) regarding weakening market fundamentals.
On Monday, US Treasury Secretary Scott Bessent announced that President Donald Trump is still dedicated to meeting Chinese President Xi Jinping in South Korea this month.
The meeting comes as both nations are working to ease heightened tensions related to tariff threats and export controls.
Last week, sentiment was negatively impacted by two key developments: Beijing’s broader export controls on rare earths and Trump’s threats of 100% tariffs and software export restrictions set to begin on November 1.
On Tuesday, Beijing imposed sanctions on five US-linked subsidiaries of South Korean shipbuilder Hanwha Ocean.
Concurrently, the US and China are set to introduce additional port fees for ocean shipping firms transporting various goods, from holiday toys to crude oil.
Meanwhile, the IEA, in its monthly report on Tuesday, revised its global oil supply growth forecast upwards for the current year.
This adjustment follows the OPEC+ group’s decision to increase production. Conversely, the IEA lowered its demand growth forecast, citing a more challenging economic environment.
Separately, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, stated in their monthly report on Monday that the oil market’s supply deficit is expected to shrink in 2026.
This projection is based on the broader OPEC+ alliance’s planned output increases.
At the time of writing, the price of West Texas Intermediate crude oil was at $58.15 per barrel, down 2.2%, while Brent was 2.1% lower at $61.98 a barrel.
Gold rises
Gold prices continued their upward trend, reaching a new record high of nearly $4,191 per ounce early this morning, even as other markets saw recovery on Monday.
“This is likely due to renewed concerns about an escalation in the conflict between the US and China, which were fueled further this morning after the Chinese government imposed sanctions on the American units of a South Korean shipping company,” Thu Lan Nguyen, head of FX and commodity research at Commerzbank AG, said in a report.
The recent US sanctions on China’s shipping industry highlight that the ongoing conflict between these two economic giants extends beyond trade. This significantly raises the potential for further escalation.
“For the planned meeting between Presidents Trump and Xi at the APEC summit in South Korea, these developments are certainly not good omens,” Nguyen added.
In this environment, it comes as no surprise that gold remains in high demand.
At the time of writing, the December gold contract on COMEX was at $4,146 per ounce, up 0.3%.
Silver surges on supply squeeze
Though silver prices were slightly down on Tuesday, the recent surge in prices have seen the metal notching up a series of record highs.
Earlier this morning, the contract on COMEX had breached the $52 per ounce level for the first time ever.
“Even more than the gold market, the real momentum continues to be seen in other precious metals markets, most recently, particularly in silver,” Nguyen noted.
Early this morning, silver prices began to correct after reaching a new record high of just over $52 per ounce, representing a gain of up to 120% since the beginning of the year.
Concerns about supply, similar to those observed in other metal markets, have contributed to the recent sharp price increase.
Reports suggest a significant surge in physical metal demand from India, intensifying fears of supply bottlenecks, especially in the London market.
For example, the unprecedented jump in silver lease rates (the cost of borrowing silver) indicates liquidity issues within that market.
Inventories at COMEX have been declining since the beginning of the month, potentially signaling a movement of outflows towards London.
Nguyen added:
However, the correction in prices this morning shows that the market had overheated. If the gold price rally continues, however, silver prices are likely to remain well-supported.
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