Commodity prices fell sharply on Thursday, with losses spanning precious metals, oil and industrial metals, as easing geopolitical tensions and a firmer U.S. dollar prompted investors to unwind defensive positions. The sell-off followed a phone call between U.S. President Donald Trump and Chinese President Xi Jinping, alongside renewed prospects for U.S.-Iran talks later this week.
Silver suffered the steepest decline, plunging nearly 15%, while gold, crude oil and copper dropped around 2%. The retreat reflected both reduced geopolitical risk and pressure from a strengthening dollar, in which most commodities are priced.
Geopolitics and Risk Sentiment
Analysts said the sharp moves were partly a reaction to extreme volatility seen earlier in the week. Tony Sycamore, an analyst at IG, described Thursday’s declines as “aftershocks” following heavy speculative positioning in precious metals.
Optimism over diplomacy weighed heavily on markets. Expectations that talks between Washington and Tehran are back on track removed some of the geopolitical premium embedded in oil prices, while easing trade tensions after the Trump–Xi call reduced demand for traditional safe havens such as gold.
Dollar Strength Adds Pressure
The U.S. dollar steadied near a two-week high at the start of Asian trading, ahead of interest rate decisions from the European Central Bank and the Bank of England, both of which are expected to keep rates unchanged. A stronger dollar typically makes commodities more expensive for holders of other currencies, dampening demand.
Earlier in the week, prices had already come under pressure after Trump nominated Kevin Warsh as the next Federal Reserve chair. Markets interpreted the move as reinforcing a hawkish outlook for U.S. monetary policy, boosting the dollar and increasing the opportunity cost of holding non-yielding assets such as gold and silver.
Precious Metals Reverse From Records
Spot gold retreated from near a one-week high, while spot silver extended its sharp decline. Just last week, gold surged to a record $5,594.82 an ounce and silver reached an all-time high of $121.64, levels that analysts said left prices vulnerable to rapid profit-taking.
Christopher Wong, a strategist at OCBC, said sentiment had turned broadly negative across asset classes, with losses feeding into one another amid thin liquidity. He added that this self-reinforcing dynamic was evident not only in precious metals, but also in cryptocurrencies and regional equity markets.
Oil and Industrial Metals Under Pressure
Oil prices fell about 2% after confirmation that the United States and Iran will hold talks in Oman on Friday. The prospect of diplomacy eased fears that a military confrontation could disrupt supplies from the Middle East, one of the world’s most critical oil-producing regions.
Copper also declined, weighed down by concerns about demand and rising inventories in London Metal Exchange-registered warehouses. The metal, widely used in construction and manufacturing, had earlier found support from China’s plan to expand its strategic copper reserves, but that optimism faded as broader risk sentiment deteriorated.
Agricultural Markets Buck the Trend
Soybeans were a notable exception, rising to a two-month high after Trump said China was considering purchasing U.S. cargoes. The comments revived hopes of renewed Chinese demand, offering support to agricultural markets even as other commodities slid.
Analysis: From Fear Premium to Risk Unwind
Thursday’s broad-based commodity sell-off underscores how quickly markets can reverse when geopolitical risks recede. Assets that had benefited from fear-driven buying particularly gold, silver and oil were hit hardest as investors reassessed worst-case scenarios that now appear less imminent.
At the same time, dollar strength and expectations of tighter U.S. monetary policy amplified the move, highlighting the fragile balance between geopolitics, currency dynamics and speculative positioning. While diplomacy has brought temporary relief to markets, the scale of the pullback suggests commodities remain highly sensitive to shifts in global narratives, leaving prices vulnerable to further volatility if sentiment swings again.
With information fro Reuters.
