Oil prices dip on prospect of record Saudi output

Oil prices fell in earlier trading as the prospect of record Saudi output put some pressure on markets. Meanwhile, gold prices reduced some losses yesterday, after mixed signals came out of the Federal Reserve meeting which indicated the possibility of a rate increase. Ebrahim Patel, Commodities Specialist, RMB, discussed the current state of commodities on CNBC Africa, shedding light on the movements in the market. Gold has been a key focus in the commodities market recently, with the dollar nudging towards the bottom end of its range against the euro. This movement has had a significant impact on the gold price, with the dollar's bearish stance contributing to a bullish outlook for the precious metal. The recent minutes from the FOMC meeting revealed that many members do not anticipate rate hikes in the near future, which further pushed the dollar lower, supporting the price of gold. Ebrahim Patel highlighted that the uncertainty in the global economy combined with ongoing quantitative easing measures could lead to a sustained upward trend for gold. If the Fed continues to refrain from raising rates, investors may increasingly favor gold as a safe haven asset, driving its price higher. Shifting focus to platinum, Patel noted a $14 increase in the platinum price, bringing it to $1,130 an ounce. While the platinum price has seen a rise, gold remains the favored precious metal due to economic fundamentals. Patel explained that platinum's industrial usage and recycling practices differentiate it from gold, which is more responsive to economic stimuli. In the current economic climate, gold is expected to maintain its status as the preferred choice over platinum. The discussion also touched on the oil market, particularly the recent developments involving Saudi Arabia's output increase and the potential impact on African producers. While African producers can influence short-term price movements, the supply story in the oil market is primarily driven by OPEC countries and Russia. With countries like Iraq, Iran, and Saudi Arabia looking to boost production, the role of African producers may not have a significant long-term impact on oil prices. When asked about Glencore's recent trading update showing declines in zinc and copper production, Patel emphasized the cyclical nature of commodities. While production cuts can lead to short-term price movements, the long-term outlook depends heavily on demand levels determined by the state of the global economy. Patel cautioned that it is still too early to predict whether the bottom has been reached for industrial metals. In conclusion, Patel highlighted the dynamic nature of commodities as an asset class, emphasizing the importance of monitoring economic indicators and global developments to gauge future price movements. The uncertainty surrounding the Fed's rate decisions and geopolitical factors will continue to influence the commodities market, making it a compelling sector for investors to watch.