Gold, copper, crude oil rebound on weak dollar

Spot Gold prices traded higher by 0.7% till 5.15 p.m. IST as a weaker dollar supported the upside in the yellow metal. But markets await to hear the Fed’s decision on interest rates and its statement. Strong November inflation data on Tuesday prompted speculation the Fed may wind down emergency economic support programs or start raising interest rates more quickly than expected. But Fed Chairman Ben Bernanke said in a letter that inflation is not a problem, while the central bank has repeatedly said it intended to keep rates near zero for an extended period.

Copper prices gained more than 1% till 5.15 p.m. IST, underpinned by fund buying and a weaker dollar ahead of the Federal Reserve’s rate decision and accompanying statement later in the day. The red metal touched a high above $7000 on the LME today as fund buying kept the market underpinned. Inventories of copper on the LME gained 2475 tonnes to 473275 tonnes, a new high since 17th April.

Crude Oil prices traded around $71/bbl levels today after rising for the first time in 10 days on a report that US factories churned out more goods in November than expected. This raised optimism that fuel demand in the world’s largest oil consuming country could rise.

Oil snapped its longest decline since 2001 yesterday as the Federal Reserve said output at factories, mines and utilities climbed 0.8 percent in November, the fourth increase in five months. Germany’s Ifo economic institute raised its 2010 outlook for growth in Europe’s biggest economy.

Outlook

The FOMC is expected to announce its rate decision and its accompanying statement today. We expect the US Fed to keep interest rates steady in this meeting. But a rise in interest rates could take place in the next couple of months as the government would plan to pullback its stimulus measures.

The dollar index could weaken today as the FOMC could keep interest rates at near zero levels. This could lead to a rise in Gold, Copper and Crude oil prices as a weaker dollar makes dollar-denominated commodities look attractive for holders of other currencies.

Courtesy: Angel Commodities

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