Quote on Gold and Crude by Kaynat Chainwala, AVP-Commodity Research, Kotak Securities
Below the Quote on Gold and Crude by Kaynat Chainwala, AVP-Commodity Research, Kotak Securities
Comex gold extended gains following a 1% gain yesterday, holding well above $2,400/oz buoyed primarily by safe-haven buying in response to the recent airstrike in Beirut by Israel. Additionally, softer U.S. Treasury yields and a weaker dollar ahead of the Federal Reserve's policy decision have supported the yellow metal. The Fed is expected to keep its benchmark rate in the range of 5.25% to 5.5%, but markets are keenly awaiting the FOMC statement, as policymakers are likely to set the stage for a rate cut in September. Swaps markets are fully pricing in a September cut, with the possibility of two more reductions by the end of the year. Investors are also keenly awaiting the US ISM Manufacturing PMI and the private jobs report for insights into the health of the US economy.
WTI crude oil prices continued to decline on Tuesday, dropping to $74.60/bbl, lowest level since June as concerns about weak Chinese demand have outweighed the impact of weekly stock drawdowns. American Petroleum Institute (API), reported US crude inventories fell by 4.5 million barrels last week. If confirmed by the EIA, this would mark the fifth consecutive week of drawdowns, the longest streak since January 2022. Today, WTI crude is gaining momentum due to escalating tensions in the Middle East, particularly following Israel's retaliatory airstrike on Beirut targeting a Hezbollah commander, alongside rising expectations of further draws in US stockpiles. Prices may also receive support as indications of a slowing Chinese economy prompt speculation of stronger stimulus measures. China's official manufacturing PMI fell to 49.4, contracting for the third straight month in July, while the non-manufacturing gauge dropped to 50.2. However, significant upside may be limited ahead of the FOMC meeting and the OPEC gathering tomorrow, where no changes to output policy are anticipated.
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