IGI Logo

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

GOLD

Gold on Thursday ended on a negative note, down 0.30 percent to end at 1847.6$ per ounce.

As Treasury yields increased, the precious metal dipped and was headed for a weekly loss, as investors await critical monthly U.S. inflation data due on Friday in order to gather clues on the future of monetary policy.

Demand for zero-yield gold has been hampered by the rising 10-year Treasury yields. Market players are waiting for confirmation that decades-high inflation reached its peak in March and has begun its journey down the mountain.

The US Fed will raise its benchmark interest rate by 50 basis points in June and July, with the likelihood of a similar rise in September. Bullion is commonly thought of as an inflation hedge, but as the Federal Reserve raises short-term interest rates to combat inflation, the opportunity cost of storing it rises.

On Thursday, the European Central Bank announced the end of a long-running stimulus program and said it would raise interest rates for the first time since 2011, followed by a potentially greater boost in September.

Outlook: We expect gold to trade lower towards 50700 levels, a break of which could prompt the price to move lower to 50320 levels.   

CRUDE

Oil prices witnessed a minor pullback but still hovered near three-month highs, with fears over new COVID-19 lockdown measures in Shanghai outweighing solid demand for fuels in the world's top consumer United States. Brent crude ended lower by 0.42 percent while NYMEX crude was up 0.49 percent on Thursday.

Despite concerns about demand in China as a result of Shanghai's new pandemic limits, Brent was on track for a fourth consecutive weekly rise and WTI was on course for a seventh consecutive weekly gain, with prices surging over the last two months. Both benchmarks closed at their best levels since March 8 on Wednesday.

However, losses were limited by forecasts that global supply will remain tight, owing to strong U.S. demand for fuels and OPEC+'s gradual growth in crude output.

Shanghai and Beijing went back on a fresh COVID-19 alert on Thursday, after parts of China's main economic hub imposed new lockdown restrictions and the city announced a round of mass testing for millions of residents.

Outlook: We expect crude to trade lower towards 9320 levels, a break of which could prompt the price to move lower to 9200 levels.   

BASE METALS

The base metals pack ended on a negative note on Thursday, as all the metals ended with a nearly 1 percent cut.

A higher dollar and fresh concerns about demand owing to partial lockdowns in top metals user China weighed on sentiment.

The dollar was at a two-week high ahead of inflation data that should guide the U.S. Federal Reserve's policy tightening path, the European Central Bank said that it would hike interest rates by 25 basis points in July for the first time in more than a decade. The U.S. Fed will hike its key interest rate by 50 basis points in the upcoming meetings in June and July.

If the euro zone's inflation position does not improve, the September interest rate hike could be substantially higher.

Outlook: Base metals are expected to trade under pressure given the stronger dollar and renewed concerns about partial lockdowns in China after Shanghai announced a round of mass testing for millions of residents.

Above views are of the author and not of the website kindly read disclaimer