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Weekly Commodity: Gold is highly sensitive to rising US interest rates

SMC | 20 Mar, 2017  | Follow Author | Add to my Favourites 
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Weekly Commentary

                    

After a steep fall of four week, finally CRB took support from bullion and energy counter and closed the week on positive note. Gold held firm as the dollar weakened after the US Federal Reserve signaled no increase in the pace of monetary tightening. The Federal Reserve on Wednesday raised US interest rates for the second time in three months, as expected, but did not flag any plan to accelerate the pace of monetary tightening as some investors had anticipated. Gold is highly sensitive to rising US interest rates, as this increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. Silver followed the footsteps of gold. Though appreciation in rupee due to positive sentiments in economy after states poll result limited the upside in MCX gold and silver and thus they recovered the weekly losses to some extent but couldn't end the week on positive side. Furthermore, oil prices rose, lifted by a surprise drawdown in U.S. crude inventories and data from the International Energy Agency (IEA) suggesting OPEC cuts should create a crude deficit in the first half of 2017. Inventories fell by 237,000 barrels in the week to March 10, compared with analysts' expectations for an increase of 3.7 million barrels. On the flip side, natural gas prices fell on Thursday as the US Energy Department's report on the nation's commercial gas inventories disappointed traders. The Energy Information Administration said gas stocks dropped by 53 billion cubic feet last week, edging down to 2.24 trillion cubic feet. The natural gas rig count for the week ending March 10, 2017, was 90.6% lower than its peak in 2008. The rig count reached a historic high of 1,606 in 2008. Despite the sharp fall in natural gas targeted rigs since August 2008, natural gas production continued to rise. In base metals, copper, nickel and zinc moved up wile lead and aluminum closed down.


In agri commodities most of the oil seeds and edible oil futures closed up on firm trend, though the upside was limited. The dollar fell, helping U.S. agricultural exports' competitiveness, while crude oil stabilized after falling sharply last week. In spices, jeera, cardamom and dhaniya prices strengthened whereas turmeric prices nosedived on ample supply pressure. Guar prices augmented on comparatively better fundamental support.

 


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About SMC
SMC Research, founded in 1990, is India’s leading share and stock broker, provides a wide range of financial services and investment solutions. A blend of extensive experience, diverse talent and client focus has made us the 4th largest broking house in India(Source: Dun and Bradstreet, 2008). Over the years, SMC has expanded its operations domestically as well as internationally. Existing network includes regional offices at Mumbai, Kolkata, Chennai, Cochin, Ahmedabad, Jaipur, Hyderabad, Bangalore plus a growing network of 2100+ offices spread across 425 cities/towns in India.


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.



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