Oil and gold prices steady amid geopolitical tensions, economic shifts

Oil and gold markets have both stabilized as trading enters the final quarter of the year, with shifting dynamics in global supply and demand driving price movements for both commodities.

Oil prices hold steady despite Middle East tensions

Oil prices remained steady at the start of the fourth quarter, as expectations of Libya resuming oil production helped counterbalance escalating geopolitical tensions in the Middle East. Brent crude for December hovered near $72 per barrel after a slight rise on Monday, while West Texas Intermediate (WTI) climbed above $68.

The Israeli military has intensified airstrikes on Hezbollah positions in southern Lebanon, following the death of the group's Iranian-backed leader.

Despite these rising tensions, the oil market has remained relatively calm, with crude production and transportation in the region unaffected thus far.

Brent crude saw a 17% decline in the last quarter, marking a significant drop since the start of the year. Market watchers are now closely monitoring OPEC+ as it prepares to reinstate production levels. Russian Deputy Prime Minister Alexander Novak stated last week that the group plans to begin restoring supplies in December, with no new proposals under discussion. Adding to the pressure on oil prices is China’s economic slowdown, despite the country unveiling a massive stimulus package last week.

Gold prices stabilize after sharp drop

Meanwhile, gold prices have steadied following their sharpest decline since August, as traders adjusted their expectations on U.S. interest rate cuts. The precious metal hovered around $2,636 per ounce after closing down 0.9% on Monday. This drop came after Federal Reserve Chairman Jerome Powell reiterated that the central bank would lower interest rates "over time," while maintaining that the U.S. economy remains strong.

Also read:Gold prices hold steady after rally amid prospects of deeper Fed Rate cuts

Powell’s remarks led traders in swap contracts to scale back expectations for aggressive rate cuts. Lower borrowing costs tend to favor gold, which doesn’t yield interest, as it makes the metal more attractive to investors. Despite the recent dip, gold surged 13% in the third quarter, marking its largest quarterly gain since early 2016.

Geopolitical tensions and safe-haven demand

In addition to the anticipation of rate cuts, gold prices have been supported by strong central bank purchases and increased demand for safe-haven assets. Ongoing conflicts in the Middle East and Ukraine, along with uncertainty surrounding the upcoming U.S. presidential election, have fueled this demand.

While the Bloomberg Dollar Spot Index remained relatively unchanged, silver prices edged higher after hitting their highest levels since 2012 last week. Platinum and palladium prices, however, saw slight declines.

The escalating Israeli-Hezbollah conflict could further bolster gold’s appeal as a safe-haven asset if tensions in the Middle East worsen.

Key economic data

Looking ahead, the U.S. September jobs report, set to be released this Friday, will be closely watched as it could prove pivotal in shaping the Federal Reserve’s future interest rate decisions. Raphael Bostic, President of the Atlanta Federal Reserve, recently indicated that he is open to an additional half-percentage-point rate cut in November if job growth shows signs of slowing.

The upcoming jobs data and Powell’s next speech are expected to provide clearer insights into the Fed’s appetite for further rate cuts as inflation continues to ease and the U.S. economy remains resilient.

(with input from Reuters and Bloomberg)