Evening Track : Gold Holds Near Record Highs on Fed Rate Cut Hints, Global Uncertainty by Kotak Securities Ltd
Comex gold futures surged to a record $3,065.2 per ounce, subsequently retracting to around $3,042, yet maintaining gains above the previous session close. The prices are steady near record highs as it is underpinned by heightened expectations of US Federal Reserve rate cuts, despite acknowledging economic uncertainties, and robust safe-haven demand amidst escalating geopolitical tensions. Israel's renewed ground operations in Gaza, coupled with ongoing US strikes against Houthi targets in Yemen, fuel this demand. Furthermore, persistent concerns over global trade disputes, including impending new duties and existing US tariffs, contribute to market volatility. The downing of numerous Ukrainian UAVs by Russian forces further reflects the heightened geopolitical instability.
WTI crude surged above $67/barrel, supported by heightened Middle East tensions while data showed robust fuel consumption. Renewed Israeli-Gaza conflict and continued US strikes against Houthi targets in Yemen amplified supply risk. US inventory data revealed a 1.8 mb crude stockpile increase to 437 million barrels, contrasting with a sharp distillate and gasoline decline, reaching early 2025 lows. Potential Russian oil supply return, following Ukrainian ceasefire progress, offered a counterpoint. Market sentiment further factored in the FOMC's maintained 2025 rate cut projections alongside revised GDP and inflation forecasts, shaping the broader economic outlook.
LME base metals exhibited mixed trading, with copper retreating after briefly exceeding $10,000/tonne. Comex copper prices, however, approached record highs due to Trump's proposed tariffs, triggering a surge in US-bound shipments and a notable price divergence. Anticipated arrivals of 100,000-150,000 tons of refined copper are tightening global supply. Chinese demand is projected to recover, supported by government stimulus, while declining LME and Shanghai inventories further exacerbate supply concerns. Conversely, Chinese alumina exports soared to a seven-year high, reflecting a supply surplus. The Federal Reserve's indication of potential future rate cuts, despite temporary tariff-induced inflationary pressures, provides a broader economic context.
European natural gas futures surged 2.3%, reaching a two-week high, driven by diminished hopes for increased Russian supply amid stalled Ukraine peace talks. The failure to secure a 30-day truce exacerbates concerns over critically low inventory levels, nearing the end of the heating season. This situation has produced a market structure where summer gas prices exceed winter prices, disincentivizing storage replenishment. Analysts emphasize the complexity of negotiations, hindering a swift return of Russian pipeline gas. The EU is actively exploring strategies to bolster reserves, as the prospect of adequate winter stockpiles faces increasing challenges. The EU is actively exploring strategies to bolster reserves, as the prospect of adequate winter stockpiles faces increasing challenges.
Above views are of the author and not of the website kindly read disclaimer
