Commodity Article : Gold prices near 1-month highs; Crude likely to snap weekly losing streak Says Prathamesh Mallya, Angel One
Below is Gold Article by Mr. Prathamesh Mallya, DVP Research, Non-Agro Commodities & Currency, Angel One Ltd.
Gold prices near 1-month highs; Crude likely to snap weekly losing
GOLD
Gold held steady near its one-month peak as anticipated U.S. inflation and weaker job figures reinforced predictions of the Federal Reserve maintaining interest rates this year.
The U.S. personal consumption expenditures price index saw a 0.2% increase, mirroring June's growth, while the index rose 3.3% over the past year, compared to June's 3.0% uptick.
Although U.S. consumer spending gained momentum in July, U.S. Treasury yields and the dollar index slightly rose after briefly paring gains post-data release, reducing the allure of non-yielding gold.
According to the FedWatch tool, it indicated an 88.5% probability of unchanged rates in September and a 51% chance of a pause in November.
Outlook: Gold prices are expected to remain under pressure, as expectations that the US Fed will keep the interest rates at elevated levels.
CRUDE OIL
Oil prices looked to break a two-week decline, climbing for a third consecutive day as supply constraints and anticipation of an extension in output cuts by the OPEC+ coalition fueled the rise.
Forecasts point towards Saudi Arabia prolonging its voluntary 1 million barrels per day production reduction through October, amplifying the OPEC+ production curbs.
Recent U.S. government data revealed a greater-than-expected drop in crude inventories, attributed to robust exports and refinery activities.
Notably, commercial crude reserves have steadily decreased since mid-July. This consistent decline in U.S. stockpiles serves as an indicator of the global demand-supply equilibrium, suggesting a potential supply deficit.
Outlook: We expect crude to trade higher towards 6950 levels, a break of which could prompt the price to move higher to 7010 levels.
BASE METALS
Copper prices faced a decline driven by China's contracting manufacturing sector, underlining weakened demand prospects and exacerbated by a stronger dollar's negative influence.
China's ongoing manufacturing contraction, reflected in its official purchasing managers' index (PMI) for August, underscores the need for increased policy support to stimulate the economy.
The trajectory of dollar-priced metals is often shaped by the U.S. Federal Reserve's interest rate decisions; a stronger dollar raises costs for non-dollar holders, potentially stifling demand.
Copper prices are also impacted by a surge in LME-approved warehouse stocks, reaching a 90% increase since July 12, the highest since October last year.
In contrast, aluminum prices are buoyed by anticipation of robust Chinese demand and significantly reduced inventories in Shanghai Futures Exchange-monitored warehouses, with recent increases in Chinese aluminum imports adding to the positive outlook.
Outlook: We expect copper to trade lower towards 733 levels, a break of which could prompt the price to move lower to 730 levels.
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