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GOLD

After witnessing an uptick in the previous session on Friday, the prices came under pressure during Monday's session, as the precious metal ended the day with a 2.79 percent cut, ending at 1818.8$ per ounce.

As a strong dollar undercut safe-haven demand fueled by economic slowdown fears and the potential of aggressive monetary policy tightening, gold prices stayed near a four-week low.

The dollar, which is considered a rival safe haven, appeared to be the preferred option, holding at a two-decade high reached on Monday and luring most investors away from the greenback-priced gold.

The opportunity cost of storing bullion, which pays no interest, rises as short-term US interest rates and bond yields rise. In light of the strongest inflation data, the Fed is expected to seek a 75 basis point rise at its June meeting. A 75-basis-point increase would be the biggest since 1994.

Outlook: We expect gold to trade lower towards 50480 levels, a break that could prompt the price to move lower to 50250 levels.   

CRUDE

On Monday, oil prices recovered from the minor pullback witnessed in the previous session, as Brent crude ended higher by 0.43 percent while NYMEX crude was up 0.22 percent.

On Monday, oil prices traded on a volatile note as they bounced back and forth, yet they managed to retain the upside despite recession fears and the possibility of further COVID-19 limitations in China, which might dampen the demand as the market remains tightly supplied.

Supply constraints have been exacerbated by a drop in exports from Libya due to a political crisis that has impacted output and ports, China's continued implementation of measures to slow the spread of COVID, while other OPEC+ producers struggle to meet their production quotas and concerns about global recession woes driving demand destruction.

Just as the restrictions were being eased in the Chinese cities of Shanghai and Beijing, renewed concerns of a fresh Covid outbreak at a bar in Beijing have raised fears of a new phase of lockdowns.

The market will be awaiting weekly U.S. inventory data from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday for a view of how tight crude and fuel supply remain.

Outlook: Prices are expected to remain elevated as the oil market has shrugged off recession fears so far. For now, the perceived tightness in oil supply is lending resilience to oil prices.

BASE METALS

Weakness persisted in the base metals pack, as all the metals ended on a negative note on Monday, with LME Nickel being the top losing metal from the lot.

Aluminum prices dropped to a six-month low on Monday as fears of further lockdowns in top consumer China, inflation, and higher interest rates triggered a sell-off, although dwindling inventories provided some support. Aluminum stocks in LME registered warehouses are at 21-year lows compared with March 2021. Stocks in warehouses monitored by the Shanghai Futures Exchange have dropped more than 20% since the middle of March.

The aluminum market in China was quiet due to a probe into the fraudulent use of inventories to raise finance. The investigation involves three Shanghai-based firms suspected of having pledged aluminum stocks several times over, the state-backed Securities Times reported about the said issue.

The landscape looks rather depressing ... elevated inflation, the ongoing war in Ukraine, higher energy prices, and a Chinese government that is keeping the country's growth bottled up. Authorities in Beijing raced to contain a COVID-19 outbreak traced to a 24-hour bar, with millions facing mandatory testing and thousands under targeted lockdowns.

Soaring inflation around the world, partly to do with higher energy costs, means consumers are likely to cut back on purchases, which will undermine demand for industrial metals. Central banks hiking interest rates to rein in inflation also means consumer belt-tightening and damage to demand, as the U.S. Federal Reserve is expected to raise rates this week, which is forecasted to be a 75-basis-point hike.

Outlook: We expect copper to trade lower towards 756 levels, a break that could prompt the price to move lower to 746 levels.