Spot Gold prices gained around 1% till 5.00 pm IST as weakness in the dollar provided upside support to prices. Movement in the dollar is crucial for the yellow metal as we witnessed in the last week that prices came under pressure on the back of a stronger dollar. The dollar could rebound if the currency strengthens on the back of risk aversion in the financial markets. A stronger dollar could exert pressure on gold prices.
Copper prices gained marginally today as a weaker dollar provided support and as a decline in LME inventories came in as a bullish factor. Inventories of copper on the LME declined 800 tonnes to touch 533,400 tonnes today. The red metal will take cues from economic data announcements, movement in the dollar and inventory rise or gain.
In the last few days, we have witnessed a decline in LME inventories and that factor is helping copper prices find some support. But overall prices could face downside pressure as 1) stronger dollar, 2) mixed economic data and 3) concerns over the strength of the global economic recovery could weigh on prices.
Crude Oil prices traded in the positive territory today, taking cues from the current weakness in the dollar. But prices could come under pressure in the later part of the trade if the dollar strengthens. As such fundamentals in the case of crude oil remain bearish as China is expected to continue to tighten its monetary policy over the next six months.
The move by China to limit credit and raise reserve requirements for banks could lead downside pressure as China is the world’s second-largest energy consumer. In the short-term, we expect oil prices to trade with a negative bias as demand concerns could put pressure on prices.
Outlook
The US is expected to announce economic data on existing home sales today. The movement in the dollar will be determined by the data announcement. Overall, the dollar could strengthen as markets remain risk averse.
Crude oil prices could come under pressure as demand concerns persists. Copper prices could trade with a negative bias if the dollar strengthens and leads to selling pressure in the commodity. Gold prices will take cues from the movement in the dollar and economic announcement for today.
