Gold Shines While Oil Skids Sideways

Looking ahead, the intricacies of diverse economic data from the US, combined with the nuanced details in the FOMC meeting minutes, add complexity to forecasting the commodity market movements. 

Over the past two weeks, market dynamics played out with a central focus on the potential for a shift in the Federal Reserve's stance, significantly impacting the dollar index and Treasury yields. The release of the November Federal Open Market Committee (FOMC) meeting minutes unveiled a consensus among policymakers, indicating a cautious approach to future rate hikes. The crucial factor influencing any potential tightening will depend on the progress achieved in alleviating inflationary pressures. This outlook led to a decrease in the dollar index and Treasury yields, creating conditions conducive to a rise in multiple commodities. [EasyDNNnews:PaidContentStart]

While the market responded positively to the expectation of the Fed's interest rate hike ending, persistent worries about global economic activity exerted selling pressure. Inflation concerns in the US weakened, and the belief that the Fed could orchestrate a soft landing for the economy continued to influence asset prices. Simultaneously, ongoing apprehensions about the Chinese economy negatively affected the commodity market. 

As global macroeconomic data underscored the prolonged weakness in economic activity, a downward trend prevailed in base metals. LME base metals received support amidst a weakened dollar and optimism surrounding potential stimulus measures from China. The focal point in China centred on addressing challenges in the property market, with reports indicating policymakers pressuring banks to address a substantial USD 446 billion funding shortfall. Additionally, a draft list of 50 eligible developers for financial support was in progress to stabilize the industry and tackle the backlog of unfinished apartments. 

Notably, LME Copper stood out as the top performer in the metals sector, surpassing the USD 8400 per tonne threshold. This was attributed to an increasing Yangshan premium and lower Treatment and Refining Charges (TC/RC), indicating a tighter concentrates market than initially anticipated. 

Gold, being a non-yielding asset, enjoyed a robust second consecutive week in positive territory. Swaps traders reflected a market sentiment with a 40 per cent probability of the Federal Reserve lowering borrowing costs as early as May. The appeal of gold, especially in times of a weakening dollar, remained strong. Meanwhile, silver recorded a gain of over 2.50 per cent on a weekly basis, confirming an Inverse Head and Shoulders bullish pattern. If validated, this pattern has the potential to drive silver prices toward the USD 25 to USD 25.70 per troy-ounce range. A parallel pattern was identified in COMEX gold, pending technical confirmation. 

Performance of Gold in the last one year 

*Gold prices are mentioned in USD. 

In the energy sector, WTI Crude oil futures started the week positively amid speculations that OPEC+ might consider deepening supply cuts to bolster prices. However, optimism was dampened as the cartel decided to postpone its meeting, citing disagreements over output quotas for African members. This delay introduced an element of uncertainty to oil markets, contributing to increased volatility. Regarding price action, WTI NYMEX Crude oil is expected to maintain a range-bound movement, fluctuating between USD 78 and USD 72 per barrel. 

According to data from the University of Michigan, American consumers are expecting an annual inflation rate of 4.5 per cent in the coming year, slightly surpassing previous expectations. Furthermore, several economic indicators, such as durable goods orders and jobless claims, paint a varied and complex picture.

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