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

GOLD

Post-higher-than-expected US inflation figures lifted the dollar and fueled hopes that the Federal Reserve will continue on an aggressive policy tightening path, gold prices witnessed a steep decline on Tuesday, falling over 1%.

In addition to treasury yields that were hovering close to a three-month high, the US dollar index soared, posting its largest one-day percentage gains since March 2020.

U.S. consumer prices unexpectedly rose in August and allowing the Federal Reserve leeway to announce a third 75 basis point interest rate hike at its upcoming meeting.

Outlook: We expect gold to trade lower towards 49700 levels, a break of which could prompt the price to move lower to 49280 levels.

CRUDE

Oil prices also slipped on Tuesday, as both the benchmark crude indices ended on a lower note. Brent ended with a 2.38 percent cut, whereas the NYMEX ended 0.54 percent lower.

As long as inflation remains significantly higher than the US Federal Reserve's goal rate of 2%, the US Fed is expected to raise interest rates. In the data released on Wednesday, consumer prices unexpectedly increased, maintaining pressure on oil prices.

As the dollar index soared close to all-time highs, buyers holding other currencies will have to shell out more for crude priced in dollars.

The OPEC reiterated its predictions for increased global oil demand in 2022 and 2023 on Tuesday, noting indications that major economies were performing better than anticipated despite challenges including rising inflation.

Outlook: The expectation of a US Fed rate hike coupled with a strong dollar might put crude prices under pressure.

BASE METALS

On Tuesday, the industrial metal pack turned in a mixed trading session as Copper and Nickel ended on a lower note on the LME, whereas, Copper, Lead, and Zinc ended in the negative territory on the MCX.

The base metal prices fell after higher-than-anticipated U.S. inflation data sparked concerns about more aggressive Federal Reserve interest rate increases that could reduce metals demand. Post the startling CPI data, the dollar grew even stronger, registering its largest daily percentage gain since 2020.

When the dollar is strong, commodities priced in dollars become more expensive for holders of other currencies.

However, a dispute between workers and Chile's Escondida mine, the largest copper deposit in the world, remained unresolved, as union workers supported a partial strike last week and threatened a full work stoppage due to safety concerns at the mine.

Outlook: The expectation that the US Fed will raise interest rates by 75 basis points has sparked concerns about metals demand in the face of China's protracted Covid-19 problem.

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