Below is Commodity Article by Mr. Saish Sandeep Sawant Dessai, Research Associate- Base Metals, Angel One Ltd
Gold prices on Monday slipped on the lower side after registering a positive week after a brief run of negative returns in the past weeks. It ended with a cut of 0.44 percent to end at 1718.8$ per ounce.
The next major trigger for the yellow metal is the U.S. Federal Reserve policy meeting, where policymakers are expected to raise interest rates by 75 basis points. The opportunity cost of owning non-yielding bullion rises as interest rates rise. A hike of that size would end the economy's assistance from the epidemic era.
Since the dollar has weakened over the past week which has led to an uptick in gold, as a weaker dollar makes gold less expensive for buyers holding other currencies.
Outlook: We expect gold to trade higher towards 50970 levels, a break of which could prompt the price to move higher to 51370 levels.
Crude prices bounced back after ending the previous week on a lower note, as both benchmarks managed to clock gains in yesterday's session. Brent gained 1.89 percent, whereas NYMEX gained 2.11 percent.
Gains in crude came as expectations that Russia's restriction in natural gas supply to Europe may stimulate a switch to crude, but the gains were constrained by worries about declining fuel demand as a result of an anticipated rise in U.S. interest rates.
Russia tightened its gas squeeze on Europe, as supplies through the Nord Stream 1 pipeline to Germany would drop to 20% of capacity. Russia's reduction in supplies will prevent countries from refilling natural gas reserves in time for the winter demand season.
The US central bank is widely expected to raise interest rates by 75 basis points at its policy meeting on Wednesday. A hike of that magnitude would effectively close out pandemic-era support for the economy.
Outlook: We expect crude to trade higher towards 7840 levels, a break of which could prompt the price to move higher to 7950 levels.
The base metals on Monday ended on a mixed note, as Copper and Nickel managed to end on a positive note, whereas the other metal ended on a negative note. On the MCX, except for copper, all the metals ended on a lower note.
Following a decline in the value of the dollar, copper prices continued their upward trend from the previous week since a lower dollar makes these metals more affordable for owners of other currencies.
However, the last ECB rate hike was greater than expected, serving as a reminder to investors that aggressive measures to fight inflation may trigger a recession.
Due to COVID-19 outbreaks and worries about a worsening global economic slowdown which threatens metals demand as central banks attempt to raise interest rates to combat inflation, metal prices have been afflicted.
Outlook: The upside in metals is likely to remain capped given the anticipation of a 75 basis point rate hike by the US Fed will be a major headwind.
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