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Stronger US dollar drives significant correction in metals
Precious metals underwent a substantial correction following a resurgence in the US dollar, which increased the cost of dollar-denominated commodities for international buyers. Simultaneously, the core Producer Price Index (PPI) accelerated year-on-year, intensifying pressure on the Federal Reserve’s inflation control measures. In the energy sector, blue-chip oil majors ExxonMobil and Chevron exceeded quarterly expectations, despite experiencing a contraction in their overall income levels.
Gold and other precious metals faced an aggressive sell-off as the US dollar strengthened against a basket of global currencies.
Base metals, including copper and aluminium, similarly experienced a downward correction in line with broader commodity market trends.
The US Producer Price Index remained steady at 3.0% year-on-year, yet the core PPI accelerated to 3.3%; both figures surpassed market forecasts.
ExxonMobil and Chevron outperformed analyst revenue and earnings-per-share (EPS) estimates, although their year-on-year revenue figures exhibited a contractionary trend.
Metals face sharp correction amidst dollar resurgence and profit-taking
Precious and industrial metals retreated significantly at the market close as the US dollar staged a notable recovery after touching four-year lows. Futures contracts on the COMEX and NYMEX exchanges saw prominent corrections, with precious metals bearing the brunt of the selling pressure.
The gold contract (GCG26) plummeted by 11.39% to $4,745 per ounce, while silver (SIH26) fell by 31.37% to $78.53. Additionally, the platinum contract (PLJ26) depreciated by 18.97% to $2,121, and palladium (PAH26) declined by 15.63% to $1,703. Industrial metals also trended lower; copper (HGH26) closed down 4.51% at $5.92, and aluminium fell by 3.14% to $3,090.
Conversely, the US Dollar Index (DXY) appreciated by 1.02% to 97.15 points, rebounding from a fortnight-long decline. A strengthening dollar typically exerts downward pressure on commodities, as it increases the acquisition cost for holders of other currencies. Market analysts also attributed the move to widespread profit-taking, as investors could move to lock in gains following the sustained rally observed in recent months.
US PPI exceeds analyst estimates, signalling persistent inflation
Data from the US Bureau of Labour Statistics revealed that the Producer Price Index (PPI) remained unchanged in December at 3.0% year-on-year. This figure was notably higher than the 2.7% slowdown anticipated by economists. More significantly, the core PPI—which strips out volatile food and energy costs—accelerated from 3.1% to 3.3%, considerably exceeding the 2.9% forecast.
While these data points had a negligible impact on immediate interest rate expectations—with the market still pricing in two 25-basis-point cuts for the year, according to the CME’s FedWatch Tool—they serve as a potential warning of rebounding inflation. This inflationary pressure is increasingly linked to the US government's imposition of tariffs, tool used for geopolitical and commercial purposes over last months.
ExxonMobil and Chevron surpass quarterly forecasts
ExxonMobil successfully outperformed analyst expectations for both total revenue and earnings per share. The company reported total revenue of $83.31 billion, exceeding the $81.04 billion forecast. Adjusted earnings per share (EPS) reached $1.71, beating the $1.68 estimate. Although revenue marked a 1.3% year-on-year decrease, EPS grew by 2.3% over the same period. In response, ExxonMobil's share price rose 0.63%, reaching a fresh all-time high of $141.40.
Similarly, Chevron Corporation exceeded market consensus, posting total revenue of $46.87 billion against a forecast of $46.79 billion. The firm reported an EPS of $1.52, surpassing the $1.42 projection. Despite these beats, the results reflect the challenging environment for oil majors; revenues fell by 10% year-on-year, while EPS contracted by approximately 26%. Nevertheless, investors focused on the operational beat, driving Chevron’s stock up 3.34% to close at $176.90.
