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Published on 28/11/2022 12:59:05 PM | Source: Angel One Ltd

Commodity Article : Gold rises as dollar tumbles, Crude extends weakness Says Prathamesh Mallya, Angel One

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Below is Daily Commodity Article by Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities, and Currencies, Angel One Ltd

GOLD

After witnessing a short pause during the previous week, gold prices were back in positive territory, concluding the week with gains of over 1 percent.

The dollar, a safe haven alternative, had risen as a rise in COVID-19 cases in China, which fueled concerns about the future of the global economy, thus the price of the yellow metal did start the week on a lower note.

The possibility that the US Federal Reserve will increase interest rates by 50 basis points at its next meeting drove the dollar higher. However, a dip in the dollar index and the release of the US Fed meeting minutes, which likely indicated that the rate hike pace will slow down in the forthcoming meetings, helped the yellow metal march higher and ultimately end on a winning note.

Outlook: The upside in gold is likely to be limited, given the anticipation that, the US Fed in its upcoming meeting would hike the interest rates by 50 basis points. 

 

CRUDE

The prolonged weakness in crude continued for another week, as prices of the benchmark crude, NYMEX ended lower by over 4 percent. Crude had begun the week with a sharp fall, as prices slipped over 6 percent, as Saudi Arabia dismissed a media story that it was contemplating an increase in oil supply with OPEC and its allies.

The increasing COVID-19 infections that are approaching April peaks in China are limiting the gains in crude prices.  Additional restrictions imposed by Chinese cities to stop the coronavirus's spread are adding to investor worries about the economy and gas demand.

Due to reports from the industry that showed US crude stocks decreased more swiftly than expected, prices did show some signs of reversal during the week. The gains, however, were short-lived and gave way to the current adverse pressure.

Outlook: The ongoing Covid restrictions in China would continue to hurt the demand sentiments for crude.

 

BASE METALS

The lost momentum in the previous week seems to come back, as most of the industrial metals ended on a higher note, except for Aluminium, which was nearly 1 percent down. New COVID restrictions in the top user China and a stronger dollar, on the other hand, were what kept the pressure on the base metals.

While local authorities in the southern Chinese city of Guangzhou temporarily cordoned off the area, the capital city of China saw an increase in COVID-19 instances. The dollar stood near to a three-month low as a result of the prospect that the Federal Reserve might pause US interest rate increases, eventually leading to a weekly loss.

As the value of the dollar declines, industrial metals become more affordable to those using other currencies. Base metal prices increased as the Federal Reserve's minutes from its November meeting suggested that the pace of interest rate increases may soon halt, base metal prices moved higher. 

Outlook: A falling dollar would keep the metal prices elevated, however, weak demand from the major consumer China would limit the upside.

 

 

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