Bank of America Forecasts 60% Surge in Commodities Trading Driven by Oil and Gold Market Demand

Bank of America's Commodities-Trading Revenue Soars 60% in First Quarter

Bank of America Corp.'s commodities-trading revenue has experienced a significant surge of 60% in the first quarter, with markets businesses at the biggest US banks reaching record highs. This increase was largely driven by volatile market swings in oil and precious metals, specifically gold.

The activity levels in oil and precious metals, particularly gold, were extraordinary in the first quarter. Global oil markets have been in turmoil since the US and Israel launched strikes on Iran earlier this year, effectively closing the Strait of Hormuz, the vital oil and gas shipping route. The conflict also damaged critical infrastructure in the Middle East, including oil fields, gas facilities, and ports.

Precious metals also had a volatile first quarter, with gold rising to a record above $5,400 an ounce before plunging in a late January metals-market rout. After regaining some ground, gold and silver retreated again following the start of the Iran war. Gold ended the first quarter 8.1% higher.

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Another major contributor to the trading windfall at Bank of America was the international business, which jumped 23% in the quarter from a year earlier. This contributed 45% of activity in the overall sales and trading division, according to co-heads of global markets Denis Manelski and Soofian Zuberi.

Equities trading was up 30% in the first three months of the year, fueled by increased client activity and capital extended to the business for growth. The firm saw more client financing activity, particularly in Asia, as well as strong trading performance in derivatives, according to Chief Financial Officer Alastair Borthwick.

The market swings have been good news for the trading businesses at Bank of America and its rivals across Wall Street, which benefited from clients repositioning their holdings. Bank of America's markets division posted its 16th consecutive quarter of year-over-year growth, with stock traders setting a three-month record.

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Manelski and Zuberi were named co-heads last year after former markets leader Jim DeMare was promoted to co-president of the bank in September. Manelski was previously head of sales for fixed income, currencies, and commodities, while Zuberi was in charge of the equities sales and trading unit.

The ongoing conflict in the Middle East has significantly changed the investing landscape, according to Manelski. The duration of the wars will have an impact on how investors position themselves and think about the global economy going forward.