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

GOLD

Post managing to end the week on a marginally higher note, the price of the yellow metal was up by the slightest of margins on Monday, as it ended with 0.06 percent gains and closed at 1737.8$ per ounce.

Following Fed Chair Jerome Powell's hawkish remarks at the Jackson Hole symposium on Friday, prices hit a one-month low on Monday. However, prices inched up by the end of the session as the dollar eased off a 20-year high, offsetting pressure from expectations that the US Federal Reserve will keep interest rates higher for longer to combat inflation.

The dollar index fell from a two-decade high on Monday, while benchmark 10-year rates fell from a two-month peak reached the previous session. The warning from the world's top financial heads is clear that excessive inflation is here to stay and taming it would need exceptional effort, most likely a recession with job losses and shockwaves across emerging countries.

While gold is regarded as a safe haven during times of economic turmoil, rising interest rates raise the potential cost of owning the non-yielding asset.

Outlook: We expect gold to trade lower towards 50810 levels, a break of which could prompt the price to move lower to 50390 levels.

CRUDE

On Monday, crude prices extended their gains from the previous week, as they ended with gains of over 4 percent, notching their highest gains in more than a month in the previous session

In several of the world's largest economies, inflation is nearing double digits, a level not seen in over a half-century, prompting central banks in the United States and Europe to turn to more aggressive interest rate hikes.

However, political unrest in Iraq, OPEC's second-largest producer, supported prices on Monday night. Another factor supporting oil prices was shortages. Saudi Arabia, OPEC's biggest producer, increased the prospect of output curbs last week.

Also weighing on prices is the fact that Russia's oil output has exceeded expectations in the aftermath of the Ukraine war and will find it increasingly difficult to maintain output as Western sanctions begin to bite, according to the chairman of the International Energy Agency (IEA).

Outlook: Oil prices may continue to climb due to supply bottlenecks and the possibility that OPEC+ will restrict output. The rising dollar, on the other hand, may keep the upside in check.

BASE METALS

The LME remained closed for trading on Monday, however, the industrial metals on the MCX put on a mixed show, as Aluminium and Nickel were the only two metals ending on a higher note. Aluminum's post witnessing gains in the previous week continued to show strength and extended its gains on Monday.

Metals, on the other hand, are said to be under pressure due to concerns about weaker economic growth after US Federal Reserve Chair Jerome Powell signaled additional interest rate hikes.

Powell warned on Friday that Americans were in for a difficult period of slow economic growth and even growing unemployment. Slowing growth may reduce demand for base metals and copper is often used as a barometer of global economic health.

On the macro front, following Powell's hawkish remarks last week, the US dollar index hit a 20-year high of 109.49 on Monday. A member of the European Central Bank's executive board stated that the European Central Bank may hike interest rates by 75 basis points at its meeting on September 8.

On the supply side, energy supply pressure in Sichuan province has lessened as the local weather has cooled. The smelters, particularly those in Guangyuan, were considering a production recovery. Domestic supply tightness was alleviated to some extent.

Outlook: We expect copper to trade lower towards 660 levels, a break of which could prompt the price to move lower to 650 levels.

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