Commodities continue to struggle; all eyes on US & China economic data, Fed comments

Commodities have witnessed a directionless week as market players continued to assess Fed's monetary policy stance, virus situation as well as health of Chinese economy. Such directionless trade may continue in the near term with no clear cues.

COMEX gold tested March low earlier this week but bounced back sharply and has been rangebound near $1750 per troy ounce in the last few sessions. Crude oil bounced back after taking support near $65 a barrel however the gains lost momentum just below $70 a barrel. Copper also witnessed mixed trade reflecting volatility in the larger market and amid labour concerns in Chile.

Commodities started the week on a negative note as upbeat US non-farm payrolls data and some hawkish comments fueled expectations that Fed may start monetary tightening soon. Market sentiment however improved as US consumer price data came largely in line with expectations weakening the monetary tightening debate. Commodities however lost traction again as producer price data showed a much bigger-than-expected rise in prices reflecting rising price pressure.

The Fed has begun debate over monetary tightening but has failed to give a clear timeline as to when it will start tapering bond purchases. Lack of clarity from the Fed has caused market players to look at economic numbers and central bank comments to gauge how soon the Fed may start. With mixed economic data and mixed Fed comments there is uncertainty about Fed's next move. Uncertainty in the market is also evident from diverging trends in asset classes. While commodities have lost their upward momentum on tightening concerns and US dollar and bond yields have inched up, US equities are setting fresh record high levels.