Gold rose oil, silver, and copper all fell, but iron ore edged higher in another day of volatile trading for major commodities.
Gold prices ended higher on Tuesday for the first time in six sessions, the rebound coinciding with an announcement from the US Federal Reserve that it was establishing a lending facility to assist US corporations in rolling over short-term debt, a key area of the market that had frozen during the coronavirus pandemic.
That saw Comex April gold leap $US39.30, or 2.6%, to settle at $US1,525.80 an ounce, but the impact on Comex silver for May delivery was different – the price rose briefly and then turned lower again to settle at $US12.495 an ounce, down 32.1 cents, or 2.5%. That was the lowest settlement since late April 2009.
Copper kept on falling (which is a worry because it is regarded as a proxy for the health of the Chinese economy) Comex May copper shed 3.3% to $US2.3135 a pound.
And the price of 62% Fe iron ore fines delivered to northern China rose 30 cents to settle at $US91.20, yet another example of the unusual level of resilience in this market for the past month.
The Fed announcement was a big deal. Setting up a commercial paper funding facility to improve liquidity will help hundreds of companies large and small by providing short term funding for businesses strapped for cash due to the disruptions to trade and travel caused by efforts to combat the epidemic.
In a statement, the Fed said it was acting to provide credit “that will support families, businesses, and jobs across the economy.”
The announcement removes the growing fear that hundreds of US companies, especially in energy, airlines, travel and retailing will fail because they cannot refinance themselves with short term debt, as they normally do.
At the same time, the Trump administration is reported to be about to reveal a massive $US850 billion ($A1.4 trillion) stimulus package with including payroll tax and help for airlines.
Oil futures fell again on Tuesday globally, dipping to yet another four-year low, despite the rebound on Wall Street and news of big-spending packages in the UK, France, New Zealand, and the US.
At the same time, the ‘war’ between Saudi Arabia and Russia showed no sign of being resolved as both countries continue to ignore appeals from OPEC members to stop the price cuts and volume boosts that have destabilised global energy markets.
London-based economic research group, IHS Markit said on Tuesday it now sees a global oil supply surplus on a monthly basis ranging from four million barrels a day to 10 million barrels a day from February to May 2020.
“Thus, if Saudi Arabia goes ahead with its plan to massively increase output in April, they will be doing so just as demand is retreating globally because of all the lockdowns due to the coronavirus,” Markit energy analysts told MarketWatch.
A note from Societe Generale, the French bank warned that “oil demand destruction” will peak in the second quarter, with 5 million barrels a day of oil demand “destroyed in those three months.”
All this sent prices lower.
The US. benchmark, West Texas Intermediate crude for April delivery fell by $US1.75, or 6.1%, to settle at $US26.95 a barrel in New York. That was the lowest front-month contract finish since February 2016.
May Brent crude, the global benchmark, lost $US1.32, or 4.4%, to settle at $US28.73 a barrel in Europe—for the lowest settlement since January 2016.
