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

GOLD

After gold showed some late recovery during the previous week, which saw it eventually ending on a marginally higher note. However, the weakness kicked in again as the yellow metal slipped below the $1700 mark.

The uncertainty surrounding the Fed Chair's address at the Jackson Hole Symposium was erased when Powell stated that the central bank would continue to raise interest rates in order to contain inflation, which is far higher than the Fed's target inflation.

However, the prospect of rate hikes caused the bullion price to fall to one-month lows. The dollar index maintained pressure as it achieved fresh highs in response to recent data and hawkish comments from the Fed Chair and other central bank officials. Investors anticipate that the Federal Reserve and the European Central Bank will hike interest rates by 75 basis points at their scheduled meetings later this month.

Manufacturing figures from Europe and Asia have raised concerns about the possibility of a worldwide recession. While gold is considered a safe haven in times of economic distress, rising interest rates increase the potential cost of possessing the non-yielding asset.

Outlook: The Fed is expected to deliver a 75-basis point hike which might cap the upside in the yellow metal.

CRUDE

The recently concluded week saw crude prices taking a steep dive as NYMEX Crude ended over 10 percent lower. The pullback witnessed in crude over the week, has paved its way for a weekly loss due to demand fears.

The benchmark NYMEX hit fresh multi-week lows amid mounting demand concerns due to lacklustre economic activity, such as central bank hawkishness and a complete lockdown of the Chinese city of Chengdu.

Fears of an impending glut pushed up crude prices in the wake of news of a possible agreement with Iran and the probable return of 1 million barrels per day of Iranian crude oil exports. Inflation is approaching double digits in several of the world's top economies, a level not seen in more than a half-century, forcing central banks in the United States and Europe to pursue more aggressive interest rate hikes.

The strengthening of the US dollar was also a drag, as the  price of oil is inversely related to the price of the US dollar.

Outlook: We expect crude to trade higher towards 7100 levels, break of which could prompt the price to move higher to 7210 levels.

BASE METALS

The base metals pack moved Southwards, with LME Zinc being the top losing metal, down 10 percent. Metals were under pressure after new data from the world's major economies revealed slow economic performance, weakening the outlook for industrial metals demand.

China, the world's largest metals consumer, saw a drop in factory activity as COVID-19 cases appeared in the country amid the ongoing property crisis. China's official manufacturing PMI fell for the second month in a row in August.

Meanwhile, another trigger for the drop was US Federal Reserve Chair Jerome Powell's speech, which signalled more interest rate hikes, which propelled the US dollar index to a 20-year high of 109.49 on Monday. According to a member of the European Central Bank's executive board, the ECB may raise interest rates by 75 basis points at its upcoming meeting.

Nexa Resources, one of the world's top five zinc producers, has paused operations at its Atacocha San Gerardo open pit zinc mine in Peru owing to an illegal road blockage by a local community, compounding concerns over the ongoing zinc smelter catastrophe.

Outlook: We expect copper to trade lower towards 626 levels, break of which could prompt the price to move lower to 616 levels

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