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Below the Quote on Gold and Crude by Kaynat Chainwala, AVP-Commodity Research, Kotak Securities

Comex gold futures fell below $2,600 per ounce owing to the Federal Reserve's hawkish tone, following a widely anticipated 25 basis point rate cut. This prompted the US 10-year yield to rise to 4.45%, and the US Dollar Index to hit a two-year high of 108.3. Fed Chair Jerome Powell remarked that the policy rate has been reduced by a full percentage point from its peak, making the overall policy stance significantly less restrictive. This shift allows for a more cautious approach to future rate adjustments. The Fed's quarterly forecasts show officials expect the benchmark rate to reach a range of 3.75% to 4% by the end of 2025, suggesting two quarter-percentage-point cuts, down from the 100 basis points previously projected in September. Additionally, the median 2025 PCE inflation forecast increased to 2.5% from 2.1%. Today, Comex gold is currently trading near $2,620 per ounce, as traders recalibrate rate cut expectations while keenly awaiting US GDP, unemployment claims, and housing data.

WTI crude oil surged above $71 per barrel yesterday, driven by a decline in U.S. crude oil stocks. The U.S. Energy Information Administration reported an inventory drop of 900,000 barrels for the week ending December 13. Product inventories were mixed, with distillates seeing a drawdown of 3.2 million barrels, while gasoline inventories increased by 2.3 million barrels for the second week of December. However, prices pulled back from their highs as the dollar surged to a two-year high of 108.3, following the release of the closely watched Fed dot plot projections, which indicated that several officials now expect fewer rate cuts next year. Today, oil prices continued their decline, edging lower toward $70 per barrel as the Fed signaled it likely would only implement two rate cuts in 2025, as officials now anticipate it will take longer for inflation to reach their 2% target.

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