Gold, crude, metals advance on Wednesday

Spot Gold prices gained almost 1% till 5.00 p.m. IST in today’s trade as a weaker dollar supported the yellow metal. A rise in risk appetite also raised demand for higher-yielding and riskier investment assets. Gold prices touched a high of $1,117.40/oz today and continued to trade higher.

A rise in investment demand coupled with concerns over inflation led to higher demand for gold as a hedge against inflation. Gold prices on the MCX touched a high of Rs16,788 and traded higher by 0.6% till 5.00 p.m. IST.

Copper prices rose higher on the back of a struggling dollar and investment interest that helped to offset the negative effect of decline in Chinese copper imports. China’s economic data release in the morning indicated that industrial production gained 16.1% from a year earlier, the most since March, 2008. Retail sales too jumped 16.2% in October.

This data came on the positive side but Chinese imports of Copper products declined 34%. This factor earlier put pressure on copper prices but the red metal managed to revive on the back of weakness in the dollar. General sentiment in the financial markets improved on the back of better Chinese economic data and raised risk appetite, thereby pressuring the dollar.

Crude Oil prices advanced as Chinese crude imports neared a record high and the dollar weakened, buoying demand for commodities as an alternative investment. China’s net oil imports were almost 19 million tons, or 4.5 million barrels a day, the second-highest on record.

Markets anticipate demand from China to rise in the future as China is the second-largest oil consumer after the US. Imports in China rose as industrial production spurred fuel demand. The US Energy Department is expected to publish its weekly inventory data tomorrow as the US observes a bank holiday on account of Veteran’s Day today. Natural gas inventory data will be released on Friday.

Outlook

There is no economic data release from the US today as there is a bank holiday on the back of Veteran’s day. But the equity and commodity markets would function on a normal basis. Gold, Copper and Crude Oil prices will take cues from the movement in the dollar. The Dollar Index dropped today as equities rose worldwide and investors bet that the Federal Reserve will not raise interest rates in the near-term.

We expect the dollar to trade with a negative bias. This will provide a support to dollar-denominated commodities like Gold, Copper and Crude Oil as a weaker dollar makes them look attractive for holders of other currencies.

Courtesy: Angel Commodities

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