Commodity and currency update for pound, gold, and oil prices on January 6th

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Recovery from Sharp Fall Seen at End of Last Week

The pound rose against the dollar in early European trading on Monday, up 0.4% to $1.2465, recovering some ground from the sharp fall seen at the end of last week.

Sterling’s Lowest Point Since April 2024

Sterling fell to its lowest point since April 2024 on Thursday, after data showed that factory output fell at the fastest rate in 11 months.

Business Confidence Slumps Following Autumn Budget

Data released on Monday showed that business confidence in the UK had slumped since the autumn budget, in which the government announced an increase in national insurance contributions for employers and a rise in the minimum wage. The findings of the survey from the British Chambers of Commerce (BCC) showed that more than half of companies planned to raise prices by early April.

Worrying Reverberations of Budget

Shevaun Haviland, director-general of the BCC, said: ‘The worrying reverberations of the budget are clear to see in our survey data. Businesses’ confidence has slumped in a pressure cooker of rising costs and taxes.’

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FTSE 100 LIVE: London markets lower as UK business confidence dips to two-year low
- The FTSE 100 (^FTSE) fell on Friday morning, trading at 8,206.89 points.

Stronger Dollar Weighs on Pound

The pound has also been hurt by a stronger dollar, with investors looking ahead to president-elect Donald Trump’s return to the White House later this month. Trump’s potential policy plans include lower taxes on businesses and deregulation, which could bolster economic growth, while trade tariffs could also be supportive for the dollar.

Gold (GC=F)

Gold was also under pressure from a stronger dollar, with prices of the precious metal dipping on Monday morning.

Prices Dipping

The spot price was down 0.2% to $2,634.93 per ounce, while gold futures fell 0.5% to $2.641.50 per ounce.

Gold’s Solid Start to 2025

Gold had a solid start to 2025 last week, as investors geared up for Trump’s return to office. Investors tend to look towards safe-haven investments, such as gold, in times of geopolitical and economic uncertainty.

Weighing on Gold

However, given that gold is typically traded in dollars, a stronger greenback also weighs on the precious metal.

Nitesh Shah’s Insight

According to Reuters, Nitesh Shah, commodity strategist at WisdomTree, said Trump’s tariff agenda providing a boost to the dollar has also put underlying pressure on metal markets. ‘For most of the metals, the slowing of global trade has typically been coupled with a slowing economy and therefore slowing demand for metals,’ he said.

Oil (BZ=F, CL=F)

Oil prices were also down on Monday morning, as another commodity coming under pressure from a stronger dollar.

Brent Crude Futures

Brent crude futures fell 0.4% to $76.21 per barrel, eased back after nearing $77 barrel, a level not seen since mid-October. Meanwhile, US West Texas Intermediate (WTI) crude dipped 0.3% to $73.75.

Stronger Dollar’s Impact on Oil

A stronger greenback makes it more expensive to buy dollar-priced oil.

Susannah Streeter’s Analysis

Susannah Streeter, head of money and markets at Hargreaves Lansdown (HL.L), said that oil ‘had been propelled higher as a cold weather snap descended across the US and parts of Europe, adding to expectations of higher heating oil demand.’ Traders are also waiting on extra stimulus for China’s economy to be detailed by authorities. But the recent strength of the dollar appears to have led to this mini dip in appetite for crude and overall, the appetite for energy still remains uncertain, given the threat of tariffs from the US, and the knock-on effect on global growth.

What’s Next?

In broader market movements, investors will be keeping a close eye on the pound, gold, oil, and other commodities as they navigate the complex economic landscape. The strength of the dollar is having far-reaching implications for global markets, and it remains to be seen how events unfold in the coming weeks.

FTSE 100 (^FTSE) Trading at 8,206.89 Points

The FTSE 100 (^FTSE) fell on Friday morning, trading at 8,206.89 points. For more details check our live coverage here.

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