Gold prices may stay range bound; OPEC to continue output cuts despite bullish signals – Moneycontrol.com
The holiday shortened week was driven by central bankers’ policies, OPEC and rising rupee. After weeks of bearishness, the yellow metal rebounded as the Federal Reserve surprised the street with dovish under tone.
The Fed left interest rates unchanged and signalled little appetite for increasing them again in the near futures.
Comex gold gained after the US Fed said that the US economy was slowing more than it had previously thought. Jerome Powell, the Fed chair, said the economy is in a good place but he and his colleagues said growth appeared to be slowing from last year, under the weight of the Trump administration’s trade war, economic slowdowns in Europe and China and fading stimulus from the Republican tax cuts of 2017.
With this statement, the US Fed has effectively abandoned all plans to raise rates this year.
WTI crude oil has appreciated by approximately 1 percent in the week gone by buoyed by the biggest drop in American crude stockpiles since July at a time when the OPEC and a coalition are pressing on with its output curbs. OPEC and its allies earlier reaffirmed intent to continue their supply cuts until at least June, when they’ll meet to discuss prolonging the efforts to avoid a global glut.
Crude is holding on to its rally after hitting a new high for the year. The OPEC and its allies continued to show their commitment to bring the market into balance in the face of surging American shale production.
While disruptions in Venezuela and Iran have also squeezed supplies, uncertainty surrounding ongoing trade talks between the US and China is keeping investors wary.
Base metals were range bound, but zinc was the top gainer due to shrinking inventories. LME zinc stockpiles have hit the lowest since 1991.
Stockpiles dropped for a tenth day on March 21, with draw downs seen at depots in the US and Europe.
Going ahead, in the absence of any major surge in gold-backed ETFs investment demand, gold prices may stay range bound. If Indian rupee depreciates due to recent surge, there is chance of gold rallying on the MCX.
OPEC’s Joint Ministerial Committee meeting in Baku has decided to continue with output cuts until they meet again on June 25-26 in Vienna.
WTI crude oil has already gained around 30 percent year to date, hence going ahead there is probability of profit booking however, the undertone is bullish due to OPEC’s firmness to support prices.
Lastly, US – China trade will be theme for coming week as US trade representative and treasury Secretary are going to meet Chinese counterpart in Beijing next week. Nonetheless, due to rising dollar, the base metal may feel the heat.
The author is, Research Analyst- Commodities Fundamental at Anand Rathi Shares & Stock Brokers
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