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

Comex Gold prices surged to a record high of $2,617.40 on Monday, driven by a weaker US dollar amid growing expectations of a significant rate cut. The CME FedWatch Tool now indicates a 67% chance of a 50 basis point rate cut by the Fed, up from 50%, with a 33% probability of a 25 basis point cut. Geopolitical risks, particularly in the Middle East, and an alleged assassination attempt on former US President Trump are also supporting gold prices. The dollar fell to a 14-month low of 100.58, and rate-sensitive US 2-year Treasury yields dipped to 3.5%, their lowest since March 2023, as market expectations shifted towards a larger rate cut at the upcoming FOMC meeting in September. Today, gold prices held steady as investors await US retail sales data to assess if consumer spending continued to strengthen in August.

WTI crude oil prices rose 2% yesterday, as a sharp drop in Libyan exports and growing expectations of a significant rate cut outweighed concerns about demand due to a persistent economic slowdown in top importer China. Lingering supply disruptions caused by Hurricane Francine, with about 25% of oil production still offline, coupled with a notable decline in Libyan exports amid an ongoing impasse over control of the central bank, pushed oil prices to $70.70 per barrel. Disappointing Chinese data weighed on prices earlier, as data from last weekend showed industrial output growth slowing to a five-month low in August, with weakened retail sales and fixed asset investment. Additionally, Chinese refining runs fell by around 920,000 barrels per day in August, down 9% from last year, indicating soft domestic demand and oversupply. Today, WTI Crude Oil extended its gains, trading near $70.60 per barrel, and may hold steady ahead of the Fed's policy decision.

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