Commodity Research Evening Track by Kotak Securities
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Commodities edged lower after a sharp rally
Comex Gold prices remained steady after it climb to all-time highs of $2,694.9 an ounce driven by expectations of further monetary easing and heightened geopolitical tensions. The recent decline in US consumer confidence reinforced the dovish stance of the Federal Reserve, aligning with previous signals of another interest rate cut. Meanwhile, China's central bank announced its largest stimulus package since 2020, which includes interest rate cuts. Gold's appeal as a safe haven was further boosted by the escalating violence in the Middle East.
The People’s Bank of China cut the rate of the medium-term lending facility to 2% from 2.3%, according to a statement on Wednesday. The 30- basis-point cut was the biggest since the bank began using the monetary tool to guide market interest rates in 2016.
WTI Crude Oil prices remained elevated near above $71 per barrel, supported by developments in the Middle East and expectations for increased energy demand in China. Iranian President Masoud Pezeshkian's statement that Israeli attacks in Lebanon "cannot go unanswered" raised geopolitical tensions. Meanwhile, China's central bank's stimulus measures boosted global stock markets, though their impact on energy demand remains uncertain.
LME base metals see modest declines after a sharp rally in the last few sessions fueled by sweeping stimulus measures announced by China to revive the economy and achieve the 5% growth target planned for this year. LME Copper edged below $9800/tonne, Aluminium slipped 1.5% to $2520/tonne and Zinc held near $3000/tonne as investors digested China’s stimulus package.
European natural gas rose 2.7% reversing Tuesday's decline, due to slower stockpiling, raising concerns about potential supply shortages during the winter. While gas storage sites are above the seasonal average at 94% full, they are below levels seen a year ago. Some countries, like Germany, have even started to withdraw gas from storage. Traders are closely monitoring inventories as the weather cools across northwest Europe, potentially boosting heating demand.
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