IMF Annual Meeting and BRICS Summit set to influence commodity markets in data-light week

Commodities Markets Update

By Kaynat Chainwala, AVP Commodity Research at Kotak Securities

This week’s (ended on October 18) commodity market advances were largely driven by easing recession fears in the US dollar surged to a two-and-a-half-month high of 103.87, closing higher for the third consecutive week, as strong retail sales, a robust jobs report, and higher-than-expected consumer price index (CPI) figures, prompted swaps traders to trim their bets on rate cuts in the remaining two meetings of 2024.

Resilient consumer spending, which constitutes about two-thirds of US economic activity, and a stabilising labour market after earlier summer softness reinforced the belief that a recession is unlikely. This optimism pushed US equities higher, with the S&P 500 and Dow Jones hitting record highs.

Gold prices remained stable early in the week as signs of US economic strength and comments from Fed official Christopher Waller suggested a potentially less aggressive approach to rate cuts. However, later in the week, Comex gold prices reversed course, peaking at $2,737.80 per ounce, supported by dovish policies from major central banks, ongoing geopolitical tensions in the Middle East, and concerns surrounding the upcoming tight US elections. Comex Silver saw an unprecedented 7 percent rally on Friday to close near $34 per troy ounce for the first time in 12 years.

MCX Gold (December futures) on the daily chart has provided an upward breakout of its ‘Flag’ chart pattern confirming a bullish continuation. Also, price has taken support of its ‘Role Reversal’. Price can test its resistance placed at Rs 78,500 per 10 grams, whereas next support for the counter is placed at Rs 77,000 below which major support is placed at Rs 76,400.

Related stories

Kaynat Chainwala

Senior manager - commodity research|Kotak Securities

• 
  Fed policy signals may guide commodities amid lack of US data
• 
  Commodities eye US inflation numbers, Chinese key data for further direction
• 
  Commodities brace for volatile week as US-China trade tensions and extended shutdown cloud outlook

On the contrary, WTI crude oil fell below $69 per barrel, marking an approximately 8 percent decline, the largest weekly drop since late September. This decline was primarily due to reports that Israel would focus its retaliatory strikes in Iran on military targets. Additionally, lowered demand growth forecasts from OPEC and the IEA, reduced refinery output in China, and the resumption of production and exports from Libya added to the downward pressure on oil prices. Weakness in oil was further exacerbated by slowing economic growth in China and President Biden's renewed calls for a cease-fire in Gaza.

LME base metals also extended their declines as investors reacted to a lack of details following China's finance minister's hints at fiscal stimulus and increased debt issuance. Also, recent data showed that Chinese growth in Q3 was the slowest since the first quarter of 2023, and highlighted deflationary pressures and weak consumer spending.

The upcoming IMF and World Bank annual meeting, starting October 21, is set to address pressing global economic issues. Markets are also eyeing the BRICS summit in Russia from October 22-24, where President Putin may propose a new cross-border payments network to counter Western sanctions and promote national digital currencies, aiming to reduce reliance on the US dollar.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.