Gold and crude oil prices have experienced a significant uptick. The precious metal has extended its gains, solidifying its position as a safe-haven asset amidst global economic uncertainties. Simultaneously, crude oil has witnessed a sharp increase, primarily driven by supply concerns and robust global demand.
Rising gold prices often reflect investor concerns about inflation and economic instability. Conversely, a soaring oil price can fuel inflationary pressures while also impacting consumer spending and business costs.
As these trends unfold, it is crucial to monitor their impact on various sectors and markets.
Prathamesh Mallya, DVP- Research, Non-Agri Commodities and Currencies, Angel One, shared trend insights on gold, base metals and crude prices.
Gold
Gold prices surged over 1% on Monday, reaching their highest level since August 2, as safe-haven demand increased amid global geopolitical tensions and anticipation of key U.S. inflation data.
The ongoing conflict between Israeli forces and militants near Gaza, coupled with a surprise Ukrainian military advance into Russia’s Kursk region, has heightened concerns about potential wider regional conflicts involving Iran and its proxies.
Investors are closely watching upcoming U.S. producer and consumer price data, which could provide further insights into the Federal Reserve’s interest rate trajectory.
In this environment, gold is attracting attention as a traditional hedge against geopolitical instability and economic uncertainty, particularly as lower interest rates tend to boost the appeal of non-yielding assets like bullion.
Outlook: Gold prices are expected to remain strong, driven by heightened geopolitical tensions and anticipation of key U.S. inflation data that could influence the Federal Reserve’s rate decisions.
Crude
Oil prices surged by over 4% on Monday, marking their fifth consecutive day of gains, as escalating tensions in the Middle East raised concerns about potential disruptions to global crude supplies.
The U.S. Defense Department’s decision to deploy a guided missile submarine to the region underscores the seriousness of the situation, with fears growing that Iran and Hezbollah might retaliate against Israel, potentially widening the conflict.
Such an escalation could lead to U.S. sanctions on Iranian oil exports, threatening to remove approximately 1.5 million barrels per day from the market.
Additionally, expectations of U.S. interest rate cuts, driven by signs of cooling inflation, have also supported oil prices, as lower rates typically boost economic activity and energy demand.
Investors are also closely monitoring upcoming U.S. consumer price data, which could influence future monetary policy decisions.
Meanwhile, stronger-than-expected consumer price increases in China, the world’s largest oil importer, provided further support to crude prices, signalling robust demand in the key Asian market.
Outlook: Crude oil prices are expected to remain elevated as geopolitical tensions in the Middle East continue to fuel concerns over potential supply disruptions.
Base Metals
Copper prices rose on Monday as traders covered short positions, anticipating that prices may have reached a bottom ahead of crucial economic data from China and the United States.
Last week, recession fears in the U.S. led to a broad selloff in equities and commodities, but stronger-than-expected U.S. jobs data helped stabilise the markets.
Traders are now focused on upcoming Chinese data, including new yuan loans, industrial production, and urban investment, as indicators of future demand for industrial metals like copper.
Additionally, U.S. consumer price data due on Wednesday could influence the timing of Federal Reserve interest rate cuts, potentially weakening the U.S. dollar and boosting demand for dollar-priced metals.
Despite these positive developments, copper inventories in LME warehouses have surged by 185% since mid-May, reflecting ample supply.
Meanwhile, geopolitical concerns are also in play, with Zambia closing a border with the Democratic Republic of Congo, a key copper producer, potentially disrupting copper shipments.
Outlook: Copper prices are expected to remain under pressure, driven by weak demand from China and rising inventories.
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