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Published on 25/11/2022 11:38:40 AM | Source: AngelOne Ltd

Commodity Article : The upside in gold is likely to be capped 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

On Thursday, gold prices continue to climb higher, marching their way towards a weekly gain on the back of a retreating dollar that perceived a dovish tilt in the US Federal Reserve's interest rate hike strategy.

The release of the Fed's meeting minutes, in which a large majority of policymakers agreed that it would soon be prudent to halt the pace of rate hikes, putting the dollar on track for a weekly fall.

This year, high-interest rates, which result in a higher opportunity cost to retain the non-yielding asset, have limited the upside potential of gold and its traditional status as a hedge against rising inflation and other concerns.

Outlook: The upside in gold is likely to be capped, as it is expected that the Fed will hike the interest rates by 50 basis points.

 

CRUDE

As US markets were closed for trading yesterday, the benchmark crude index Brent managed to conclude the day with marginal gains.

Oil prices have recently dropped due to concerns about Chinese demand and hopes that a high price ceiling imposed by the Group of Seven (G7) nations on Russian oil will maintain supply. However, Oil prices are recovering from the recent losses 

The world's biggest oil importer, China, is seeing a rise in COVID-19 cases and indicating that it is beginning to affect fuel demand.

This remains a headwind for oil demand, and when paired with the US dollar's depreciation, it is creating an unfavorable environment for oil prices.

Outlook: We expect crude to trade higher towards 6580 levels, a break of which could prompt the price to move higher to 6710 levels.

 

BASE METALS

The base metals pack witnessed a mixed session, as metals like Aluminium and Nickel on the LME ended on a lower note, and on the MCX, except for Copper all other metals ended lower.

The price of copper witnessed an uptick on Thursday as a result of a falling dollar, but the gain was capped by treatment and refining costs (TC/RCs) that were at a six-year high due to an anticipated surplus of copper concentrate.

The possibility of the Federal Reserve slowing US interest rate increases caused the dollar to stand close to a three-month low and eventually head for a weekly loss.

The price of metals is strengthened by a depreciating dollar, as it makes metals cheaper for the other currency holders.

Outlook: We expect copper to trade lower towards 669 levels, a break of which could prompt the price to move lower to 659 levels.

 

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