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

GOLD

Bullion's weakness persisted throughout the week and on Friday, as a result of the stronger dollar and the expectation of additional rate hikes at the upcoming Fed meeting, the yellow metal fell for a fifth straight session.

After seeing a rise the previous week, spot gold prices for the recent week finished with a drop of 1.7 percent, snapping the current run of gains. A resurgent dollar that reached one-month highs was the key factor that caused the prices to decline.

Higher US interest rates imply a stronger currency, which on the other hand adds further downside to gold. Gold and the dollar compete as safe-haven assets. According to the Fed's policymakers, new economic data will determine the pace of rate hikes in the future.

Since the opportunity cost of storing non-yielding bullion increases with rising US interest rates, a stronger currency makes gold less appealing to foreign buyers.

Outlook: We expect gold to trade lower towards 51040 levels, which could prompt the price to move more down to 50620 levels.

CRUDE

After the previous week's upward movement, crude prices weren't off to a good start as they were under pressure at the beginning of the week. This downward pressure saw crude dropping to the lowest level before the Russia and Ukraine war.

The zero-COVID policy of Beijing and the real estate crisis both had an adverse effect on industrial and retail activity, causing the Chinese economy to unexpectedly slow down in July. All commodity prices came under pressure as the economic numbers showed slower growth than anticipated, raising fresh concerns about the future of demand.

One of the major reasons for the steady decline in oil prices since early June is lower Chinese oil consumption. Crude prices did, however, experience a rebound after falling to six-month lows owing to positive US economic data and robust gasoline consumption, allaying concerns that slower economic growth may cut demand.

The oil supply would rise if Iran and the United States accept a proposal from the European Union, which would result in an increase in the oil supply.

Outlook: We expect crude to trade lower towards 7120 levels, which could prompt the price to move more down to 6980 levels.

BASE METALS

After ending the previous week on a mixed note, the following week was no different as the industrial metals pack ended on a mixed note, with Copper and Nickel being the only metal ending on a higher note.

Although there was some downward pressure on copper prices, the reddish-gold metal nevertheless managed to close higher due to expectations of strong Chinese demand that overshadowed concerns about interest rate increases and sluggish economic growth.

Metals like aluminum and zinc, the week was highly volatile. After production at a Dutch smelter was halted due to Europe's high electricity prices, zinc jumped to its highest levels in two months. This comes after major producer Glencore Plc, citing Europe's increasing electricity prices, earlier this month issued a significant supply threat warning.

On the other hand, the PBOC surprisingly reduced its interest rate for the second time this year in a bid to increase credit demand and promote growth, which restrained the downside. But the COVID-19 lockdowns and energy restrictions in some regions of China might have an effect on the production of metals.