Commodity Insights

Gold and silver extended losses for a second consecutive session as markets positioned ahead of the annual rebalancing of major commodity indices. The reweighting exercise is expected to trigger sizeable futures selling by passive, index-tracking funds, adding pressure after last year’s strong rallies. Silver remains more vulnerable amid elevated volatility, with Citigroup estimating potential sales of nearly USD 6.8 billion in Comex silver futures, equivalent to about 12% of open interest.

Despite near-term weakness, gold continues to draw medium-term support from sustained central bank buying. Global central banks added around 45 tonnes in November, while China extended its gold-buying streak to 14 months. Persistent geopolitical tensions and expectations of US rate cuts could help limit downside, keeping the broader outlook constructive despite short-term volatility.

WTI crude oil rose about 1% to trade near USD 56.50 per barrel amid fresh uncertainty over Venezuelan supply. The US has moved to tighten control over Venezuelan crude flows, including plans to oversee future sales and seize additional sanctioned tankers. Energy Secretary Chris Wright indicated that stored Venezuelan barrels may be sold initially, with future production marketed under government supervision. Venezuela’s state oil firm PDVSA confirmed talks with Washington on crude sales using structures similar to those involving Chevron. Meanwhile, U.S. Energy Information Administration data showed a larger-than-expected draw in crude inventories, though gasoline and distillate stocks rose, while Cushing inventories increased. Softer US labour data further lifted expectations of rate cuts, supporting demand sentiment.

LME base metals traded softer, with copper slipping over 0.5% to around USD 12,830 per tonne, falling back below the USD 13,000 mark as traders booked profits after a sharp rally to record highs earlier in the week. The recent pullback follows strong speculative buying driven by supply concerns and US tariff uncertainty. Attention has also shifted to the copper–gold ratio, which has continued to weaken as gold outperformed copper over the past two years. This divergence suggests copper markets may be overly pessimistic on growth, especially given expectations that the Federal Reserve could ease policy in the coming months.

US natural gas futures climbed more than 1.5% to around USD 3.60/MMBtu, extending gains for a second session. Lower output and cooler mid-January weather forecasts have improved near-term demand expectations, with a cold spell across the Midwest and East Coast likely to boost heating demand and storage withdrawals. While Lower-48 production remains robust, rising exports to Mexico offer incremental support. However, subdued domestic consumption and softer LNG feedgas flows are capping upside, keeping the near-term bias cautiously supportive and largely weather-driven.