Below is Commodity Article by Mr. Saish Sandeep Sawant Dessai, Research Associate- Base Metals, Angel One Ltd
The precious metal's prices resumed their upward trend after breaking the losing streak in the previous week and ended with gains of more than 2%.
Following a week of pressure, gold is already showing signs of recovery. Gold is showing signs of revival after being under pressure in recent weeks. The US economy unexpectedly shrinking in the second quarter increased the risk of an economic slump, which increased gold's appeal as a safe haven and contributed to the increase.
The Fed Reserve hiked the interest rates during the week, which was in line with expectations. A rate hike of this margin has basically ended the economy's assistance from the epidemic era. As interest rates rise, the potential cost of holding non-yielding bullion increases.
Recent dollar weakness has boosted gold prices since buyers holding other currencies find gold more affordable when the dollar depreciates. However, the upside in the metal would likely be capped given the anticipation of further rate hikes depending upon economic data which would pave the way for such rate hikes.
Outlook: We expect gold to trade higher towards 52060 levels, a break of which could prompt the price to move higher to 52460 levels.
After ending the previous week on a weaker note, crude showed an uptick in the following week, as it managed to end with gains of 2 percent.
Concerns about decreased demand were partly offset, as US stockpiles and a decline in Russian gas exports to Europe, and the anticipation of the 75 basis point rate hike by the Federal Reserve had fuelled the upmove in the crude prices coupled with restriction on natural gas supply to Europe, which might stimulate a switch to crude.
As supplies from the Nord Stream 1 pipeline to Germany would reduce by 20% of its capacity, this supply shortage might become much more acute. The downside remained limited over a weaker US dollar as the focus has now shifted to OPEC's upcoming meeting, which would see the end of their output reduction pact of 2020.
Outlook: Another major trigger for crude prices will be the upcoming OPEC meeting, which will further direct the move for crude prices.
The industrial metals pack managed to conclude the week on a positive note after being under constant pressure in recent months, with LME Zinc being the leading gainer with a gain of about 11%.
Following the Federal Reserve's 75 basis point increase in interest rates to combat the rising inflation, this week saw a recovery in metal prices from their lows, with copper rising to a three-week high on the back of a weaker dollar, making dollar-priced metals more affordable to customers using other currencies.
The metal used in electricity and construction did bounce back from 20-month lows. however it is still down nearly 30% from a record high in March, the aggressive interest rate hikes in several countries can cause an economic slowdown.
Another notable development was the reports that China may offer 1 trillion yuan in loans for real estate projects that have stalled since the stimulus will increase market confidence and raise expectations for more demand from the top consumers after COVID-19 lockdowns hampered industry activity.
Outlook: We expect copper to trade higher towards 666 levels, a break of which could prompt the price to move higher to 677 levels.
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