Gold prices are rallying while oil and other commodities come under pressure

Courtney Goldsmith
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Gold prices have fallen from a high of around $1,294 in April (Source: Getty)

Gold prices have jumped as investors move to the safe haven asset while crude and other commodities dip.

Gold prices were trading 0.5 per cent higher, or $6.10, at $1,234.7 per ounce at the time of publishing.

Brent crude prices tumbled more than three per cent overnight to below $47 a barrel, the lowest level in almost six months. The drop kickstarted a sharp rally in the yellow metal as investors fear the Organisation of the Petroleum Exporting Countries' (Opec) agreed production cut will not bring supply under control.

Oil rallied somewhat after a consensus appeared to emerge among Opec and non-Opec members that the pact will be extended beyond June. The cartel will make the decision when it meets on 25 May.

However, Lukman Otunuga, FXTM research analyst, said the gold rally may be short-lived:

Although geopolitical tensions and uncertainty over Brexit and Trump may support the metal in the medium to longer term, short term bears remain in firm control.

With gold potentially finding itself dictated by US rate hike expectations, further downside should be expected as the Federal Reserve maintains a hawkish stance. The yellow metal is at risk of depreciating further if a solid Non-Farm Payroll report this evening confirms expectations of a June interest rate hike.

Read more: The Fed leaves rates unchanged and says slow US growth will be temporary

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