Gold turn weak, copper rebounds and crude steady

Spot Gold prices traded range bound today but rebounded from its weakest level in three weeks as the Dollar Index took a break after a rally. This spurred demand from bargain hunters and also lifted other precious metal prices higher. Yesterday’s strength in the dollar prompted a sell-off in riskier investment assets.

There was no economic data release from the US yesterday and gold prices took cues from the movement in the dollar. On a daily basis the relationship between gold and the dollar is very strong. Gold prices had outperformed in the last few days and broke the psychological mark of $1,000/oz mainly on the back of dollar weakness, which made the metal look attractive for holders of other currencies.

Copper prices rebounded today and traded higher by 1% till 4.00 p.m. IST as a weaker dollar came to the support. The red metal could continue to receive support from factors like strong Chinese imports, economic data and supply issues. The outlook for base metals is also starting to improve.

Crude oil prices traded little changed today around $78/bbl ahead of the API report that is expected to show that crude oil inventories expanded for a third week. A US Energy Department report due tomorrow is also expected to show that US crude stockpiles rose around 1.5 million barrels. Fundamentals in the case of crude oil remain bearish and the commodity could trade with a negative bias. However, a sharp downslide could be protected by a weaker dollar.

Outlook

The dollar factor will continue to play a dominant role in the performance of dollar-denominated commodities. If today’s consumer confidence data from the US comes on the positive side then risk appetite in the financial markets could bounce back and lead to higher base metal and gold prices. Positive economic data leads to hopes of economic recovery and thereby boosts demand for higher-yielding and riskier investment assets like equities and commodities. Though the dollar is expected to witness downside further and gold prices are expected to trade higher, physical demand remains on the weak side. Even slight strength in the dollar could put pressure on gold prices as the physical market demand remains weak. Overall, gold prices could gain only on the back of a weakness in the dollar.

Courtesy: Angel Commodities

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