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GOLD

Gold prices fell due to a slight strengthening of the dollar, as investors awaited interest rate indications from Jerome Powell's congressional hearing.

The rise in the value of the dollar made gold more expensive for holders of foreign currencies. However, if Powell's comments skew towards caution, gold may benefit.

Traders are currently pricing in a 79% chance of the Fed raising interest rates by 25 basis points in July, raising the opportunity cost of owning non-yielding gold.

Inflation in the UK remained at 8.7% in May, despite hopes that it would decline, with markets expecting the Bank of England to hike interest rates by 50 basis points (bps) on Thursday, rather than the quarter-point increase previously anticipated.

Outlook: We expect gold to trade lower towards 58260 levels, a break of which could prompt the price to move lower to 58050 levels.

CRUDE

Crude oil prices rose over one dollar per barrel in the previous session, owing to higher corn and soybean prices, which heightened predictions of lower biofuel blending and increased oil demand.

Furthermore, US crude oil stocks are said to have fallen by 1.2 million barrels, contrary to expectations of a 300,000-barrel build.

However, as Fed Chair Jerome Powell has emphasized, the anticipation of increased interest rates may limit economic growth and lower oil demand.

The limited gains in US oil output, combined with continuous cuts by OPEC+, are projected to restrain oil supply in the coming months, potentially bolstering oil prices.

Outlook: We expect crude to trade higher towards 6080 levels, a break of which could prompt the price to move higher to 6180 levels.

BASE METALS

Base metals recovered as the US dollar fell, making dollar-denominated metals more appealing to buyers with other currencies.

However, optimism about Chinese demand for copper has evaporated, depressing gains.

China's stimulus expectations have dwindled, with any prospective intervention likely to be focused and moderate.

Shanghai copper prices reached an eight-month high, boosted in part by a weaker yuan and an increase in the copper premium in the Chinese spot market.

Outlook: We expect copper to trade lower towards 728 levels, a break of which could prompt the price to move lower to 724 levels.