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GOLD

Spot gold on Monday ended a little unchanged, ending at 1675.8$ per ounce. The price of the yellow metal slipped to 29-month lows that were seen in the previous session.

The assumption that the US Federal Reserve will deliver a significant interest rate hike at its meeting this week lifted the currency and Treasury yields, which in turn put pressure on gold prices. To tackle persistently high inflation, it is anticipated that the US Fed might boost interest rates by 75 basis points, however, the markets are not overlooking the possibility of a 100 bps increase.

The dollar is still hovering near its two-decade highs, making greenback-priced bullion more expensive for overseas buyers, whereas the Benchmark 10-year US Treasury yields have surged to their highest in over 11 years.

Other central banks have also tightened monetary policy in response to worries about soaring inflation.

Outlook: We expect gold to trade lower towards 48860 levels, a break of which could prompt the price to move lower to 48440 levels.

CRUDE

Crude prices after extending the weakness to yet another week, witnessed a bounce back on Monday, with NYMEX managing to end on a higher note.

Gains were nonetheless limited because of concerns about shortages and a likely slowdown in global demand as a result of a strong dollar and potential steep interest rate increases.

Although reports emerged that OPEC missed its production targets by more than 3 million barrels per day last month, the macro component of interest rate increases and a potential recession weighed on the sentiments.

Ahead of the Fed and other central banks' meetings this week, the US dollar held close to a two-decade high. For holders of other currencies, a stronger dollar increases the price of commodities denominated in that currency.

Outlook: The likelihood of a larger Fed rate hike and a strong dollar could maintain pressure on crude prices.

BASE METALS

The industrial metals continue to extend the weakness from the previous week, as most of the metals on the LME and on the MCX ended on a lower note.

On Monday, the price of copper and other metals declined as concerns about global demand were exacerbated by predictions that the US Federal Reserve will deliver a significant rate hike this week.

Higher US interest rates result in a stronger dollar, which eventually drives up the cost of dollar-priced metals for holders of other currencies and reduces demand.

The possibility of a 100 basis point rate hike when the Fed closes its two-day meeting on Wednesday has increased in light of US data released last week that showed increasing inflation. A 75 basis point Fed rate move has probably already been factored into markets.

Outlook: We expect copper to trade lower towards 640 levels, a break of which could prompt the price to move lower to 630 levels.

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