"Daily Commodity Article" by Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities, and Currencies, Angel One Ltd
After witnessing a bounce in the previous session, gold prices on Thursday continued to trade lower, owing to the recent weakness. Prices of the yellow metal ended 0.61 percent lower ending at 1707.3$ per ounce.
Gold's rise was halted after US Federal Reserve Chair Jerome Powell emphasized the central bank's commitment to containing inflation. The Fed is likely to hike the interest rate by 75 basis points at its September meeting.
The European Central Bank boosted its benchmark interest rates by an unprecedented 75 basis points on Thursday and pledged more hikes in the coming months to combat inflation, even as the bloc is expected to enter a winter recession and gas rationing.
Higher interest rates raise the opportunity cost of owning non-yielding gold, which strengthens the currency.
Outlook: We expect gold to trade lower towards 49920 levels, a break of which could prompt the price to move lower to 49500 levels.
The benchmark crude indices ended on a mixed note, with Brent ending with a 0.52 percent cut and the Nymex ending with 1.95 percent gains.
Crude showed hints of recovering from recent weakness, but the indices are projected to fall for the second week in a row because concerns that the central bank's aggressive rate hikes and China's Covid-19 limits will affect demand. Both benchmarks were down roughly 4% for the week, with prices falling to their lowest level since January at one point.
Crude prices have fallen despite a slight decrease in output by OPEC+ amidst Russia's threat to halt oil exports to any country that supports a price ceiling on its crude, and a weaker estimate for US oil production growth.
On Thursday, the Chinese city of Chengdu extended a lockdown for the majority of its more than 21 million citizens to prevent the spread of COVID-19, while millions more in other regions of China were advised to avoid travel during the impending holidays.
Outlook: We expect crude to trade higher towards 6830 levels, a break of which could prompt the price to move higher to 6940 levels.
The base metals pack on Thursday mostly traded on a positive note, except for MCX Nickel and LME Lead, which closed on a lower note. Whereas, Copper was the top gainer on both the indices, gaining over 2 percent respectively.
Aluminum and copper prices rose on Thursday as investors were worried that stoppages caused by high energy prices or other interruptions might lead to shortages. Since energy prices began to rise last year, European smelters are projected to have curtailed 800,000 to 900,000 tonnes of aluminum production annually.
Metals markets received some support as China's cabinet announced additional moves to boost investment, extending a slew of measures to help the COVID-ravaged economy. Since late May, more than 50 policy measures have been issued.
Outlook: We expect copper to trade lower towards 645 levels, a break of which could prompt the price to move lower to 635 levels.
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