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

WTI Crude oil prices continued their downward trend on Monday, following a 4% decline last week, owing to concerns about a potential US recession intensified after a disappointing jobs report, which further weakened demand prospects amid sluggish demand from China. However, production losses at Libya's largest oilfield, which was forced to begin winding down production due to protests, helped prices recover from a seven-month low of $71.67 per barrel, closing near $73. Today, crude prices have surged above $74 per barrel, driven by a recovery in Asian markets and increasing concerns over potential heightened tensions in the Middle East, particularly as Israel reportedly prepares for a possible retaliatory strike against Iran and regional militias in response to the assassinations of Hezbollah and Hamas leaders.

Comex Gold (December) futures dropped nearly $100, falling to $2403.80 per ounce amid a volatile trading environment that reflected a broader market sell-off across various asset classes. Financial markets have begun pricing in a potential US recession, with expectations of a 50 basis point rate cut by the Federal Reserve in September, following disappointing manufacturing and employment reports. Gold prices rebounded, closing the session above $2440 per ounce, supported by a weakening US dollar at 102.7 and softer Treasury yields. Today, gold prices have edged higher, surpassing $2450 per ounce, as some stability returns to the global markets. Besides, swap traders now anticipate at least five quarter-point rate cuts by the Fed in 2024, with about a 16% probability of an emergency rate reduction before the next scheduled two-day meeting concludes on September 18.

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