Commodity Article : Gold prices dragged lower; Crude settles higher Says Prathamesh Mallya, Angel One
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Below is Gold Article by Mr. Prathamesh Mallya, DVP Research, Non-Agro Commodities & Currency, Angel One Ltd.
Gold prices dragged lower; Crude settles higher.
GOLD
Gold prices declined on Wednesday due to a strengthening U.S. dollar and rising U.S. Treasury yields.
The release of minutes from the Federal Reserve's June policy meeting confirmed the market's expectation that interest rates would remain higher for an extended period.
This development weighed on gold, as higher interest rates increase the opportunity cost of holding the non-yielding metal. Additionally, benchmark U.S. 10-year Treasury yields reached a four-month high, and the dollar gained 0.3% against other currencies.
Traders are currently pricing in an 89% probability of a 25-basis-point rate hike in the upcoming July meeting. The market is also closely monitoring China's export controls on semiconductor metals, as it escalates its technological rivalry with the United States.
Outlook: Due to the likelihood that the US Fed will increase interest rates at its upcoming meeting, gold prices are anticipated to be under pressure
CRUDE Oil
Oil prices traded near two-week highs but are down 10% this year due to concerns over China's slow economic recovery, global macroeconomic challenges, and central bank interest rate hikes.
Supportive factors include Saudi Arabia's supply curb announcement, expectations of further reductions, and a larger-than-expected drop in U.S. crude stocks.
However, China's sluggish services activity in June weighed on the demand outlook.
The Russia-Saudi oil cooperation within the OPEC+ alliance remains strong, with a commitment to supporting the market.
Outlook: We expect crude to trade higher towards 6010 levels, a break of which could prompt the price to move higher to 6070 levels.
BASE METALS
Most base metals prices declined on Wednesday due to a strong dollar and weak global economic data, which raised concerns about the demand outlook for the sector.
The dollar strengthened, making metals more expensive for holders of other currencies. Manufacturing data from the United States and Europe indicated a significant decline in June, reminiscent of the early days of the pandemic.
China, a major consumer of metals, also experienced slowing growth. However, copper prices were supported by low inventories in global exchange warehouses.
Despite an increase in China's activity to its highest level since January 2021, global copper smelting activity declined in June, continuing a downtrend observed earlier this year.
Outlook: Low demand and rising interest rates are projected to drive down metal prices.
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Quote on Silver : Silver price falls in recent weeks Says Prathamesh Mallya, Angel One
