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

GOLD

The gaining momentum in gold continued further, after the yellow metal rose on Friday, adding to the gains and eventually ending on a higher note.

Gold prices continued to rise higher post witnessing 5-month highs in the previous week. The unexpected policy shift by the BOJ, following which the dollar fell and the yen reached a four-month high, provided the bullish impetus.

However, a stronger dollar and ongoing worries about further rate hikes from the US Federal Reserve continued to cast a shadow over the prospects for non-yielding bullion, which placed pressure on the price of the yellow metal.

Gold is viewed as an inflation hedge, but when interest rates are higher, it appears to have a higher opportunity cost. The US economic data, which showed that the economy rebounded more swiftly than anticipated in the third quarter, strengthened the dollar, which in turn restrained the advances in gold.

Outlook: Due to declining US inflation and growing concerns with Covid-19 instances in China, investors are more likely to turn to gold as a safe haven asset.

CRUDE OIL

   The winning streak in crude was further extended, as the benchmark crude index, NYMEX ended on a stronger note, gaining nearly 6 percent. After the US pledged to replenish its Strategic Petroleum Reserve and dropped US crude supplies last week, further helped by a weaker dollar, the price of crude rose.

The official data showed that the US crude stock decline for the week ending December 16 was far more than anticipated.

With a strong winter storm set to hit the US, demand for heating oil is predicted to soar, which coincides with dwindling supplies.

Crude's price was impacted by the effect of an increase in COVID-19 cases after the country relaxed pandemic control measures. The effect of this development was highlighted by a decline in business confidence in China to its lowest level since January 2013.

Outlook: We expect crude to trade higher towards 6760 levels, a break of which could prompt the price to move higher to 6870 levels.

BASE METALS

After a negative week, the base metals pack witnessed a rebound, as most of the metals ended higher, except for Zinc, which continued to end on a lower note, down nearly 2 percent.

Due to a weaker currency and predictions of rising demand in China as a result of government-promised economic stimulus measures, metals like copper were able to hold onto their gains. The Chinese government declared that it would step up its initiatives to stabilize the economy.

The market's recovery was aided by reports of prospective production cuts, and worldwide shortages of metals like copper and aluminium. As markets began to get ready for the end of US interest rate increases and China began to ditch its damaging zero-COVID policy, prices rose significantly in November.

Although the loosening may ultimately lead to an increase in demand, it has also made it possible for the virus to spread across the country, eventually disrupting trade.

Outlook: After the government promised a stimulus package to get the economy back on track, there was an anticipated increase in demand for metals in top consumer China. The upside would presumably be constrained, though, by concerns about an increase in covid cases in the nation.

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