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

Comex gold surged 0.85% in the previous session due to weakness in the dollar and softer Treasury yields, as the Fed moves closer to cutting interest rates from their two-decade high of 5.25% - 5.50%. Fed Chair Powell stated that policymakers are moving closer to lowering borrowing costs, but did not commit to a rate reduction if upcoming price data proves disappointing in the coming months. Additionally, geopolitical tensions, particularly following Israel’s assassination of a Hamas leader, boosted safe-haven demand for gold. Today, gold prices may remain supported at higher levels, as Powell suggested that the Fed might cut borrowing costs as early as September. Interest rate swaps indicate that traders fully expect a quarter-point cut next month and nearly 70 basis points of reductions throughout the year. Investors are also looking forward to US unemployment claims and ISM Manufacturing PMI data.

WTI crude futures surged by 4% yesterday, driven by escalating tensions in the Middle East after Iran reportedly ordered a retaliatory strike on Israel following the assassination of a Hamas leader on Iranian soil. The killing of Hamas leader Ismail Haniyeh in Tehran, along with Israel's assassination of Hezbollah's top commander in Beirut, has further heightened tensions in the region. According to a New York Times report, Iran’s Ayatollah Ali Khamenei ordered a direct strike on Israel after Iran claimed that Israel assassinated the political leader of Hamas in Tehran, shortly after killing a senior member of Hezbollah in Beirut. Today, WTI crude oil prices extended gains and are trading near one week high of $78.70/bbl, fueled by the geopolitical risk premium following the twin strikes in Iran and Lebanon, along with a fifth consecutive U.S. inventory draw, marking the longest losing streak since January 2022. However, any significant upside may be limited ahead of the OPEC+ meeting today, where no changes to output policy are expected.

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