IGI Logo

Below is Gold Article by Mr. Prathamesh Mallya, DVP Research, Non-Agro Commodities & Currency, Angel One Ltd.     

Gold dives lower; Crude extends losing streak

GOLD

Gold prices have remained subdued, hovering near three-week lows, following an unexpected surge in U.S. private payrolls during July. This has prompted speculation of further tightening of monetary policies, bolstering the dollar and bond yields.

The U.S. dollar index climbed to a four-week pinnacle, while the benchmark 10-year Treasury yields reached their peak since November.

Despite Fitch's downgrade of the U.S. credit rating being largely disregarded by the markets, concerns linger among investors about persistent uncertainties related to the nation's debt stance, political divisions, and the global status of the U.S. dollar.

The Bank of England's anticipated hike in interest rates to a 15-year high raises apprehensions of a reiteration of June's unexpected half-point escalation, given the persistently high inflation compared to other major world economies.

Outlook: Gold prices are expected to continue facing downward pressure due to the recent upsurge in the dollar, driven by robust economic data from the United States.

CRUDE OIL

Despite initial robust trading near their peak levels since April, both crude benchmarks experienced a decline, with NYMEX witnessing a 2% decline.

This comes in response to risk-averse investor sentiment triggered by Fitch's decision to downgrade the U.S.'s long-term foreign currency ratings from AAA to AA+.

However, amidst this cautionary backdrop, crude prices found support from a tightening supply scenario. A remarkable 17-million-barrel plunge in U.S. crude stocks was reported, surpassing expectations and indicating a potential demand-supply imbalance as substantial cuts by major producers persist.

OPEC+ is anticipated to maintain its existing oil output strategy, with Saudi Arabia likely to prolong its voluntary 1 million bpd reduction into September, while Russia's recent reduction in exports aligns with its supply reduction commitments.

Outlook: The downgrade of US ratings is anticipated to impact the demand outlook for crude prices, albeit with a capped risk due to the prevailing tightening supply conditions.

BASE METALS

Copper prices experienced continued declines on Wednesday, driven by a stronger U.S. dollar and discouraging factors such as sluggish manufacturing data and challenges in China's property sector.

This week, copper has seen a decrease, with the market eagerly awaiting precise strategies from China to invigorate its economic rebound post the removal of COVID restrictions in January.

The recent data has cast doubts on the effectiveness of prior stimulus measures, prompting expectations for new interventions to bolster demand for metals.

Furthermore, the appreciating U.S. currency contributed to the downturn, diminishing the appeal of dollar-denominated commodities for non-dollar investors.

Concurrently, LME-registered warehouses observed a surge in total copper inventories, reaching a two-month peak.

Outlook: Metal prices are poised to face downward pressure due to uncertainties surrounding the delayed stimulus package, ultimately restraining potential gains in the metal markets.

Please refer disclaimer at https://www.angelone.in/ 
SEBI Regn. No.: INZ000161534

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