Commodities: Oil and copper under pressure as US dollar adds to gains

A closely-followed gauge of commodity prices finished near its session-lows on Monday, weighed down by gains in the US dollar, ongoing jitters around the direction that global risk assets were most likely to take, especially in the near-term, and continuing global trade concerns.

As of 2027 GMT, the Bloomberg commodity index was sliding 0.71% to 84.40 as the US dollar index continued to climb towards its 52-week highs at 96.9840, adding 0.26% to 96.6120 on Monday.

Multiple factors were contributing to the Greenback's gains at the start of the week, including a poor showing for Germany's main political parties in regional elections in Hesse at the weekend and investor caution ahead of policy decisions by the Bank of Japan and Bank of England later in the week.

Stronger-than-expected readings on US consumer spending and on the Federal Reserve's preferred inflation gauge, the core price deflator for personal consumption expenditures, both for September, were also bolstering the American currency.

Against that backdrop, front month Brent crude oil futures dropped 1.02% to trade at $76.85 a barrel on the ICE, alongside a 1.16% fall in NYMEX heating oil to $2.2762 a gallon.

Agricultural futures were also weaker, with December cocoa on the ICE down by 2.49% at $2,195/metric tonne and cotton #2 off by 1.73% to $0.7717 a pound.

In parallel, December gold futures on COMEX were slipping by 0.37% to $1,231.20/oz.. with similarly-dated copper futures retreating by 1.08% to $2.7115/lb..

Commenting on the outlook for gold meanwhile, analysts at TD Securities highlighted the build-up in 'long' positions as per the US CFTC's Commitment of Traders' report, as what they described as a meltdown in equity markets continued.

Nevertheless, they pointed out that: "If equity sentiment remains on edge, especially as US-China trade rhetoric begins to pick up again, we wouldn't be surprised to see gold hang around the recent highs, but we do not expect gold to break sustainably above $1,230/oz.

"With that said, TD Securities's short/medium term outlook on gold is slightly bearish, as without equity weakness propping up the shiny metal up, we see little reason for the yellow metal to remain north of $1230/oz."