Roller-Coaster Ride To Continue in the Commodity Market

During the month of October, significant attention will be directed towards key events such as the U.S. labour report, ISM PMI data, and addresses from Federal Reserve Chair Jerome Powell, alongside numerous FOMC officials. These events have the potential to introduce volatility based on economic data. [EasyDNNnews:PaidContentStart]

The final week of the September quarter brought about a tumultuous journey for the financial markets, as sentiments were impacted by expectations of a prolonged period of high interest rates. During this period, the US dollar surged to a 10-month high of 106.839, while US 10-year treasury yields reached 4.6861 per cent, marking their highest level since October 2007. 

Amidst this market turbulence, COMEX Gold prices experienced a significant decline, registering their most substantial weekly loss in months. The precious metal slipped below the critical threshold of USD 1,900 per troy ounce, mainly due to a sharp increase in US treasury yields, which raised the opportunity cost of holding gold. In terms of price action, spot gold in dollar terms breached a crucial support level near USD 1,884 per troy ounce, ending the week at its lowest point since March 2023. Additionally, it broke through a wedge pattern, indicating the potential for further weakness. If the support-turned-resistance level of USD 1,884 per troy ounce holds on a weekly closing basis, there's a possibility of a further decline to USD 1,830 per troy ounce. 

LME base metals experienced significant fluctuations. Initially, optimism prevailed due to China's industrial profits, which saw a year-on-year increase of 17.2 per cent, reversing a trend of decline over the past five months. However, concerns about liquidity and weak housing demand in China, a major consumer of these metals, prompted a pullback in prices. Nonetheless, metals managed to close higher in the past fortnight, with Zinc and Aluminium gaining more than 3.50 per cent. Positive manufacturing PMI and Services PMI released over the weekend may provide support to the metals sector in the upcoming week. 

"Brent futures for December delivery dropped to USD 90.84 a barrel, down USD 1.36, or 1.5 per cent, from the previous settlement. US West Texas Intermediate (WTI) crude fell by USD 1.57, or 1.7 per cent, to USD 89.22 per barrel in the first week of October." 

Oil prices dipped by about 2 per cent in the first week of October, reaching a three-week low. This decline was attributed to factors such as the expiration of a higher-priced Brent contract, a strengthening US dollar, and profit-taking by traders. Concerns also arose regarding forecasts of increased crude supplies and pressure on demand due to high interest rates. 

Brent futures for December delivery dropped to USD 90.84 a barrel, down USD 1.36, or 1.5 per cent, from the previous settlement. US West Texas Intermediate (WTI) crude fell by USD 1.57, or 1.7 per cent, to USD 89.22 per barrel in the first week of October. Both benchmarks were on track for their lowest settlements since mid-September. 

From a technical perspective, NYMEX WTI crude oil exhibited a Dark Cloud Cover candlestick formation, typically considered a bearish signal. This pattern suggests a potential short-term peak near USD 95.03 per barrel, with an initial target around USD 88 per barrel. A close below this level could push the price further towards the next support zone around USD 85 per barrel. Nevertheless, crude oil gained nearly 30 percent during this quarter, marking its most significant quarterly increase since March 2022. This surge is primarily attributed to concerns regarding supply restrictions.

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