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"Daily Commodity Article" by Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities, and Currencies, Angel One Ltd

GOLD

The weakness seen on Tuesday was extended further, as gold prices ended lower with a cut of 0.34 percent and ended at 1695.8$ per ounce.

As the dollar index holds stable near its two-decade highs, which makes gold pricey for holders of other currencies, gold prices dipped slightly. Some investors are reassessing the maximum rate of increase in bond yields due to expectations of a more hawkish Federal Reserve.

Consumer prices increased by 0.1% last month and by 8.3% over the past 12 months, far exceeding the Federal Reserve's 2% annual target.

Gold is highly sensitive to rising US interest rates and higher yields, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar.

Outlook: We expect gold to trade lower towards 49580 levels, a break of which could prompt the price to move lower to 49160 levels.

CRUDE

After slipping on a lower note during the previous session, crude prices showed signs of revival as prices witnessed a bounceback and concluded the day on a positive note. The benchmarks, Brent and NYMEX ended with gains of 1.77 and 1.34 percent respectively.

Oil prices rose as the market was underpinned by worries about supply and a potential rail shutdown in the United States, the world's largest consumer of crude oil. Another positive factor was the minor decline in the value of the dollar, erasing some gains from the previous session and an increase in demand from holders of other currencies for commodities denominated in the dollar, such as crude oil.

Another factor supporting the oil market is the growing risk of a U.S. rail strike caused by an ongoing labor dispute. Three unions are negotiating a new contract that may have an impact on rail shipments, which are crucial for the delivery of goods like petroleum

The International Energy Agency (IEA) stated on Wednesday that it anticipates a widespread switch from gas to oil for heating, which will average 700,000 barrels per day (BPD) from October 2022 to March 2023 - double the level of a year ago - and overall expectations for weak supply growth kept the prices in check.

Outlook: We expect crude to trade higher towards 7240 levels, a break of which could prompt the price to move higher to 7350 levels.

BASE METALS

The base metals pack continues to witness a mixed set of action, as on the LME, except for Zinc and Lead, all other metals ended on a negative note. And on the MCX, copper, and Aluminium were the only metals that ended on a lower note.

Prices for copper and aluminum dropped on Wednesday as the prospect of higher interest rates dimmed expectations for economic expansion and kept the dollar index to 20-year highs.

Data on Tuesday showing higher than expected U.S. inflation cemented expectations that the US Federal Reserve is projected to raise interest rates by 75 basis points in the upcoming week. This might trigger a sell-off in risky, growth-linked assets that have already plunged in recent months.

Additionally, it assisted in the dollar's greatest one-day gain since March 2020, which increased the price of dollar-priced commodities for buyers using other currencies and increased pressure on other central banks to boost interest rates.

Outlook: We expect copper to trade lower towards 641 levels, a break of which could prompt the price to move lower to 631 levels.

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