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

GOLD

Gold prices held steady on Wednesday, as the precious metal ended with 0.26 percent gains to close at 1837.4$ per ounce.

Following the Federal Reserve's chair's comments that the central bank was fully committed to reining in inflation and would try not to engineer a recession in the process, gold prices witnessed a minor bounce, with some support from a weaker dollar and U.S. Treasury yields.

During economic crises like a recession, gold is frequently seen as a safe store of value and is often seen as a hedge against inflation. The opportunity cost of storing bullion, which pays no interest, increases as a result of an increase in interest rates.

The dollar fell slightly, which boosted demand for greenback-priced bullion among buyers holding other currencies. Benchmark 10-year US Treasury yields have also fallen, making gold more appealing.

Outlook: We expect gold to trade lower towards 50460 levels, a break of which could prompt the price to move lower to 50040 levels.   

CRUDE

Post witnessed a minor bounce in the previous session, crude prices continued to slip lower, as Brent crude ended with a 3.09 percent cut and NYMEX Crude was down 4.03 percent

Crude oil continues to fall as investors fear that aggressive US interest rate hikes will cause a recession and reduce fuel demand, with both benchmarks falling more than 3% on Wednesday to their lowest levels since mid-May.

The Federal Reserve's Chief Jerome Powell stated on Wednesday that the Fed is completely committed to getting prices under control, even if doing so risks an economic downturn. The Fed is not seeking to engineer a recession to limit inflation.

Meanwhile, US President Joe Biden has urged Congress to pass a three-month suspension of the federal gasoline tax in order to combat record pump prices and provide temporary relief to American families this summer.

Outlook: Crude is likely to remain under pressure due to fears of a global recession, which would reduce oil demand. However, given the scarcity of supply, the downside appears to be limited.

BASE METALS

The pressure in the base metals pack persisted, as all the metals on the LME ended on a negative note, while those on the MCX managed to end marginally higher, except for copper which ended in the negative territory.

Zinc prices fell on Wednesday after ending the previous day on a high note. This year, LME zinc inventories have been eroding, indicating supply issues in Europe and the United States as smelters reduce output. The situation worsened this week when the owners of 35,000 tonnes of zinc inventories in LME warehouses announced their intention to withdraw the material, reducing available stocks by 56%.

This clearly raised supply concerns, as well as renewed fears that the zinc market would be squeezed due to low stocks. The shortages are caused in part by zinc smelter cuts in Europe by producers Trafigura, Glencore, and others in reaction to three-month high power prices.

Copper prices, on the other hand, fell to a 16-month low on Thursday due to COVID-19 concerns in China and growing fears that aggressive US interest rate hikes will tip the global economy into recession, slashing metals demand.

Outlook: Base metals are expected to remain under pressure following the weaker demand outlook from the major metal consumer China and fears of the global recession.

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