Commodities Defy Dollar: Gold & Oil Rally on Structural Supply Risks

Global commodity markets are decoupling from traditional currency correlations, rallying despite a complex macroeconomic backdrop. Both Brent Crude and Gold (XAU) posted significant gains on Tuesday, driven by acute supply-side constraints and geopolitically induced demand.

Typically, a firm US Dollar suppresses commodity prices. However, current physical market tightness and geopolitical fracturing are overriding this relationship.

• Market Disruption: Kazakhstan outage removes 890,000 barrels per day from supply.
• Regulatory Deadline: EU diesel ban full effect on January 21.
• Performance: Silver (XAG/USD) soaring 30% year-to-date.

Oil: The Physical Squeeze

Brent Crude and WTI prices are being supported by a “super-backwardation” structure (where immediate delivery prices maximize premiums), signaling a severe shortage of physical barrels.

Two key factors are driving this:

Gold & Silver: The 'Debasement Trade'

Precious metals are outperforming, with Silver (XAG/USD) soaring 30% year-to-date and Gold hovering near record highs.

Analysts point to a structural shift in buyer motivation. Beyond traditional safe-haven flows due to US-EU tensions, a “debasement trade” is gaining traction. With the US Treasury Secretary suggesting aggressive growth targets and rumors of a politically compliant Fed Chair, investors are hedging against the risk of unanchored inflation and fiscal dominance.

Copper is also rebounding, with LME warehouse stocks in the US recovering from zero, signaling a normalization of distorted trade flows. For commodity currencies like the AUD and CAD, this resource strength provides a buffer against the broader risk-off sentiment hitting equity markets.