Gold, Crude Oil and Base Metal - Aug 28, 2023 - HDFC Securities

By Mr. Saumil Gandhi, Senior Analyst - Commodities, HDFC Securities.Gold prices traded slightly down on Monday, with the spot gold price at Comex trading down by 0.05% at $1913.5 per ounce. While the gold October future contract at MCX is trading higher by 0.09% at Rs 58694 per 10 grams.

Investors continued to assess hawkish remarks from the world's top central bankers, who stressed the need to keep interest rates high until inflation is contained at the Jackson Hole gathering. Federal Reserve Chair Jerome Powell said the US central bank is prepared to raise interest rates further if needed and intends to keep borrowing costs high until inflation is on a convincing path towards the Fed's 2% target. Meanwhile, the dollar index traded at 103.70, near a multiweek high, after registering a sixth weekly gain in the previous week, the longest winning streak in 15 months.

We believe the short-term outlook remains muddled in gold due to a higher US interest rate for a longer time and the strength of the dollar index. For the week Comex Gold and MCX Gold (October) are expected to trade in the range of $1880 to $1945 and Rs. 58,180 to Rs. 59,300, respectively.

Crude oil prices rose on Monday amid mixed global cues, with the benchmark NYMEX WTI crude oil trading up by 0.25% at $80.20 per barrel against the previous close. China announced measures to boost its stock and property markets, helping offset concerns about increased supply and monetary tightening in the US and Europe. Crude oil prices declined in the previous week following speculation the US could ease sanctions on Iran and Venezuela, boosting supply, and a weakening picture for Chinese demand. News of Chinese stimulus has provided support for today's gain.

Meanwhile, money managers have decreased their bullish Brent and WTI oil bets by 35,637 combined net-long positions to 348,663, weekly ICE Futures Europe and CFTC futures and options data on four contracts show.

Based on conflicting fundamental indicators, the price of crude oil is expected to move sideways to moderately bearish during the upcoming trading session. NYMEX WTI Crude Oil has immediate support at $77.50; once price breaks this support, the fall will extend to $75.0, and it has resistance at $81.80. The MCX crude oil September contract has support at 6415 and resistance at 6750.

Base metals rose on Monday after the latest measure by the Chinese authorities to bolster its stock and property markets. China is looking to cut its stock trade taxes as well as do away with a rule that disqualifies people from being considered first-time homebuyers in major cities if they have had a previous mortgage, the state-owned China Securities Journal said Monday. Such moves are expected to support the housing market.

On the flip side, a strong US dollar and continued hawkish monetary policy from western central bankers remain headwinds for industrial metals.

We anticipate that base metal prices could move in a broader range with a moderate bullish bias. MCX Copper September contract has immediate resistance at 739; if price crosses this level, it will rally towards 755.0, and it has support at 721 for this week. MCX Zinc is expected to trade in the range of 212 to 219.