Commodity Article : Gold extends weakness, Crude inches higher Says Prathamesh Mallya, Angel One
Below is Daily Commodity Article by Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities, and Currencies, Angel One Ltd
Gold extends weakness, Crude inches higher.
Gold faced further declines on Wednesday as rising yields and expectations of prolonged higher U.S. interest rates, along with global growth concerns, drove investors towards the safe-haven dollar.
With the dollar hovering near a six-month high and 10-year Treasury yields near their late-August levels, gold's appeal diminished.
While it's almost certain that the Federal Reserve will maintain rates at its September 19-20 meeting, there's still a 43% chance of a rate hike before 2024, according to market sentiment.
Fed Governor Christopher Waller noted that recent economic data provides room for the central bank to consider further rate increases.
Outlook: We expect gold to trade lower towards 58900 levels, a break of which could prompt the price to move lower to 58810 levels.
Crude oil prices inched higher on Wednesday, buoyed by expectations of a decline in U.S. crude oil inventories, indicating tightening supplies amid ongoing production cuts by Saudi Arabia and Russia.
Tuesday saw a price surge following the announcements of Saudi Arabia and Russia extending their voluntary oil supply reductions through the end of the year, with Saudi Arabia cutting 1 million barrels per day (bpd) and Russia reducing production by 300,000 bpd.
These cuts build upon the April agreement by several OPEC+ members to continue reductions until the end of 2024. Both countries will assess market conditions monthly to determine whether to deepen cuts or increase production.
Outlook: Crude oil prices are poised for potential upward momentum due to declining U.S. inventories and sustained production cuts by Saudi Arabia and Russia.
Copper prices declined on Wednesday, driven by several factors including the weakening Chinese currency, a stronger U.S. dollar, and disappointing German factory orders, which collectively underscored global economic fragility.
Copper's dip was further fueled by robust U.S. data reigniting concerns about inflation and boosting the dollar index to a fresh six-month high.
A strengthened dollar renders commodities priced in it more costly for buyers using alternative currencies.
Despite some recovery, China's yuan hit a 10-month low against the dollar, influenced by lackluster economic data from the world's second-largest economy, including a slower expansion in Chinese services activity in August.
Outlook: We expect copper to trade lower towards 730 levels, a break of which could prompt the price to move lower to 727 levels.
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