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Daily Commodity Article by Mr. Saish Sandeep Sawant Dessai, Research Associate- Base Metals, Angel One Ltd

Gold slips as dollar climb higher, Demand worries continue to loom over crude.

GOLD

Post ending the week on a positive note, spot gold prices on Monday cracked lower by more than 1 percent, ending the day at 1778.9$ per ounce.

Due to the strengthening of the US dollar and concerns over future US Fed interest rate hikes, prices were under pressure. The yellow metal slipped to one-week lows as the dollar rose to a one-week high on safe-haven demand in response to new recession fears sparked by weak global economic data.

Fears of a global slowdown have been rekindled by a slew of negative data from China. Fed officials have maintained a hawkish tone and hinted at additional rate hikes later in the year to rein in excessive inflation, which has increased concerns about a recession.

Outlook: The uncertainty over the global slowdown amid the recent Chinese economic data, might limit the downside in the yellow metal.

CRUDE

After posting gains in the recently concluded week, crude prices witnessed a dip in Monday's session, as both benchmarks ended in the negative territory. Brent ended lower by nearly 6 percent and NYMEX ended 3 percent lower. Oil prices fall to the lowest level before Russia invaded Ukraine

The economy unexpectedly slowed down in July, with manufacturing and retail activity being constrained by Beijing's zero-COVID policy and a real estate crisis.

China's central bank lowered lending rates to boost demand. All commodity prices were under pressure as the July economic statistics revealed slower growth than anticipated, raising fresh concerns about the future of demand.

Lower Chinese oil consumption is one of the main causes for the continuous decrease in oil prices since early June.

Outlook: We expect crude to trade lower towards 7250 levels, a break of which could prompt the price to move lower to 7110 levels.

BASE METALS 

The base metals pack ended in the negative territory on Monday, as all the metals on the LME ended lower with Nickel being the top losing metal.

After witnessing a majority of the positive sessions in the previous week, the metals began the new trading week on a weaker note, as all the industrial metals cracked lower amid concerns about demand in China surfaced due to the poor economy coupled with a firmer dollar.

The PBOC, however, unexpectedly cut its interest rate for the second time this year in an effort to boost credit demand and support growth, which limited the downside.

China's economy unexpectedly slowed in July with growth in industrial output, new yuan loans slowing and a sharp reduction in investment by Chinese real estate developers in July, and new constructions suffering the greatest drop in nearly a decade.

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