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

GOLD

The precious metal seem to cool off the selling pressure, as prices managed to end Wednesday's session on a positive note, as gold ended 1.40 percent higher ending at 1833.4$ per ounce.

Prices of the safe haven witnessed a jump on the back of a falling Treasury yield and a weaker dollar, which were driven lower by a large but widely expected interest rate hike announcement from the U.S. Federal Reserve. To combat rising inflation, the Federal Reserve approved its largest interest rate hike in more than a quarter-century on Wednesday.

With the currency falling and the benchmark US 10-year Treasury yields falling, demand for greenback-priced gold witnessed an uptick. Higher short-term interest rates, on the other hand, raise the opportunity cost of storing bullion, which pays no interest.

Outlook: We expect gold to trade higher towards 50870 levels, a break that could prompt the price to move higher to 51270 levels.

CRUDE

Crude prices witnessed a steep drop in the previous session as the U.S. rate hike sparked fears of slower economic growth and less fuel demand. Brent crude ended with a 2.59 percent cut, whereas, the NYMEX Crude ended 3.04 percent lower.

After the Federal Reserve hiked the interest rates by three-quarters of a percentage point, the largest increase since 1994, prices fell more than 2% overnight. On Wednesday, the dollar index fell from its highest level since 2002, relieving downward pressure on oil prices. A higher dollar makes oil more expensive for holders of other currencies, curtailing demand.

As Western sanctions hampered access to Russian oil, investors remained focused on tight supply and strong demand, while hope that China's oil demand would revive as COVID-19 restrictions were eased supported the price outlook.

The EIA in its monthly report stated that the global demand for oil will increase by more than 2% to a record high of 101.6 million barrels per day in 2023. Although sky-high oil prices and weakening economic forecasts dimmed the future outlook.

Outlook: We expect crude to trade lower towards 9040 levels, a break that could prompt the price to move lower to 8900 levels.

BASE METALS

The industrial metals pack largely ended Wednesday's session on a positive note. Prices of Copper and Aluminium rebounded on Wednesday as investors bet that stronger-than-expected economic data from top metals consumer China foreshadowed an uptick in demand.

After a dip in April, China's economy showed signs of recovery in May, as industrial production unexpectedly rose, after falling by 2.9 percent, the production increased by 0.7 percent.

Following the easing of power consumption limitations and the lack of impact of COVID-19-induced lockdowns in the top metals consumer, the country's monthly production of aluminum reached a new high in May.

A weakening dollar index aided metal prices by making commodities purchased in US dollars cheaper for buyers using other currencies.

Outlook: We expect copper to trade higher towards 765 levels, a break that could prompt the price to move higher to 776 levels.   

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