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Daily Commodity Article by Mr. Saish Sandeep Sawant Dessai, Research Associate- Base Metals, Angel One Ltd

GOLD

The yellow metal on Tuesday continued to slip lower, extending the weakness from the previous session and ending at 1775.5$ per ounce, down 0.19 percent.

The pullback in the bullion's prices came as the dollar closed near three-week highs, while investors awaited further direction on the interest rate hikes from minutes of the US Federal Reserve's last meeting, which is set to release today.

The minutes would likely confirm the belief that aggressive rate hikes are still on the table, which would continue to support the dollar and further put downward pressure on gold.

Outlook: We expect gold to trade lower towards 51400 levels, a break of which could prompt the price to move lower to 50980 levels.

CRUDE

Post a steep sell-off on Tuesday, crude prices saw more pressure the following day as well, with prices for both benchmarks falling. It did, however, manage to recover from the lows but fell short of ending on a higher note. 

Oil prices dropped to their lowest levels in six months as a result of a larger-than-anticipated decline in US oil and gasoline supplies, which suggested that demand is still strong if overshadowed by the possibility of a worldwide recession.

On the potential renewal of the 2015 Iran nuclear agreement, further clarity is expected. If Iran and the United States accept a proposal from the European Union, it would result in an increase in the oil supply

Outlook: We expect crude to trade higher towards 7000 levels, a break of which could prompt the price to move lower to 7110 levels.

BASE METALS

On Tuesday, the base metals pack witnessed a mixed set of action, as Copper and Lead were the only metals that ended on a lower note on the LME. Whereas, on the MCX, except for Zinc, all the other metals ended on a negative note.

Because of the suspension of production at a Dutch smelter due to Europe's high power prices, zinc prices increased to their highest level in two months, fueling concerns about a metal shortage. The zinc smelting activities at Budel will be put on maintenance as of September 1, according to Nyrstar.

Leading producer Glencore Plc had earlier this month issued a serious supply threat warning due to Europe's skyrocketing power prices. The company's metal production this year has significantly decreased as a result of the closure of one of its zinc smelters in Europe.

Additionally, the Sichuan province of China, which is experiencing its worst heatwave in 60 years, rationed industrial electricity consumption, as aluminum producer Henan Zhongfu announced that it was suspending production this week.

Outlook: Base metal prices are likely to stay under pressure as US homebuilding dropped to its lowest level in almost 1-1/2 years in July and Chinese construction witnessed its worst decline in a decade.

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