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

GOLD

On Tuesday, the yellow metal prices saw a sharp decline, as it ended with a cut of 2.47 percent to close at 1764.4$ percent, sinking below the $1800 mark as the dollar witnessed a sharp upside rally, cutting the appetite for the non-yielding asset.

The dollar touched its highest level in about two decades and strengthened its position as the favored haven for investors concerned about a future recession, making the safe-haven metal less desirable for foreign buyers. The past several months have seen pressure on gold as a result of major central banks raising interest rates in an effort to rein in inflation.

Gold is considered a hedge against inflation, Although higher interest rates also reduce demand for gold bullion, which does not pay interest.

Investors are now waiting for Wednesday's release of the Federal Reserve's June meeting minutes for fresh information on the expected size of rate increases in the months to come.

Outlook: Gold prices have remained under pressure recently given the strong dollar, however, rising prospects of the Federal Reserve hiking interest rates by 75 basis points in its upcoming meeting to combat soaring inflation buoyed up the dollar.

CRUDE

Crude prices witnessed a sharp sell-off in Tuesday's trading session, as Brent ended with a cut of 8.99 percent whereas, the NYMEX began trading after an extended holiday weekend, but settled the day lower, down 8.24 percent, as concerns of a global recession curtailing demand overshadowed a strike by Norwegian oil and gas workers, a strike that would reduce exports and worsen supply constraints.

Meanwhile, safe-haven demand boosted the dollar by about 1.5%, which hurt oil prices in dollars because it becomes more expensive for buyers holding other currencies.

Due to its image as a reliable and consistent supplier, Norway, the second-largest energy supplier to Europe after Russia, enjoys high demand, particularly with Russia's Nord Stream 1 gas pipeline scheduled to shut down for maintenance this month.

Outlook: Given the expectations of a 75 basis points rate hike by the US Fed in the upcoming policy and the rising inflation will have an effect on the demand. However, supply concerns returning to the fore will limit the downside in crude prices.

BASE METALS

The selling pressure in the broader markets had its effect on the base metals group too, as all the metals ended on a negative note on the LME and the MCX except for Nickel, which managed to buck the broad-based selling and end on a positive note.

As the dollar soared on Tuesday, investment flows steered away from commodities, sending copper prices tumbling to their lowest level in 19 months and down for a fourth straight session as recession fears continued to circulate.

Commodities priced in U.S. dollars are now more expensive for buyers using other currencies as the dollar index surged to its highest level in two decades. The demand for electronic items has been impacted by recession concerns and consumer budget cuts.

As coronavirus clusters began to appear, cities in eastern China strengthened COVID limitations. To boost infrastructure expenditure and jump-start a sputtering economy, China will establish a public infrastructure investment fund worth 500 billion yuan.

Outlook: The demand from the world's major consumer of the metal, China might be at risk after a recent covid-19 cluster keeping metal prices under pressure. However, the anticipation of a rate hike might be a major headwind for base metal prices.

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