"Daily Commodity Article" by Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities, and Currencies, Angel One Ltd
Gold prices on Wednesday saw an uptick, as the price of the yellow metal gained nearly a percent and ended at 1717.7$ per ounce.
The dollar index, as well as US 10-year treasury yields, both were down on Wednesday, which fueled the rise in gold prices. However, the dollar index is still near 20-year highs, which may keep some pressure on gold.
Officials of the Federal Reserve stated on Wednesday that they are still not convinced that the worst of the US inflation fear has gone. The US central bank is expected to raise its policy rate by another 50 or 75 basis points at its September 20-21 policy meeting.
The European Central Bank meeting will be the focus, with the central bank largely expected to hike interest rates by 75 basis points on Thursday to combat runaway inflation.
Outlook: Given the economic uncertainties, gold might see an uptick, but the gains may be capped given the central banks around the world are projected to raise interest rates.
Crude prices fell more than 3% on Wednesday, indicating that weakness prevailed. Both the benchmark indices, Brent and NYMEX, finished with a 3% drop.
Expect more interest rate hikes in the coming days, as a number of central banks all over the world fight inflation, fueling fears of a recession that could slash fuel demand.
Russia's Gazprom has already suspended Nord Stream 1 pipeline flows, cutting off a significant portion of Europe's supply. Following that, the European Union suggested a ceiling on Russian gas prices.
Outlook: Crude prices might witness some volatility after Russia suspended gas supplies to Europe from the major pipeline amidst a stronger dollar, which might hurt the demand for crude.
On Wednesday, most of the base metals on the LME ended on a negative note, except for Nickel and Lead, which ended on a positive note. Whereas, on the MCX, except for Nickel, all the other metals ended in red the negative territory.
Aluminium prices fell to a 17-month low on Wednesday, while most other base metals fell as slowing global economic growth lowered demand expectations amid the boost in dollar.
The dollar has strengthened more in 2022 than in any year since 1981, reaching a 20-year high on Wednesday, making dollar-priced commodities more expensive for buyers using foreign currencies.
Germany's Speira announced on Wednesday that it will reduce aluminium output by 50% because of high energy prices, adding to the million tonnes of production capacity closed in Europe during the last two years.
Outlook: We expect copper to trade lower towards 629 levels, break of which could prompt the price to move lower to 619 levels.
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