Base metals, crude oil gain

 

 

Commodities, especially precious metals, rose on the US Federal Reserve’s decision on Wednesday to hold interest rates.  Gold is up 1.4 per cent at $1,334.5 an oz after the Fed’s announcement. In the Mumbai spot market, standard gold was also up Rs 110 at Rs 31,370 per 10 gm. Silver, too, gained Rs 700 to close at Rs 47,345 a kg. “The Fed’s inclination to raise rates in December is a positive factor for gold. The level of $1,310/oz for gold and $19/oz for silver will be supports,” said Jayant Manglik, president, retail distribution, Religare Securities.

On the London Melal Exchange, three-month forward copper was trading at 5-week high of $4,825 per tonne, breaking above  $4,800 a tonne. Aluminium also rose two per cent to $1,616, its highest since September 2. Zinc gained 0.4 per cent to $2,291, lead was up 0.9 per cent at $1,953 and tin climbed 1.8 per cent to $19,425.

“Base metals received a boost after a better-than-expected manufacturing report from China in August. A weaker dollar improves the ability of buyers to purchase more, triggering demand for base metals. This trend is expected to continue till December when rate hike concerns could emerge again,” said Gnanasekar Thiagarajan, director, Commtrendz Research.

Brent crude was up by more than one per cent to trade at $47.28 per barrel but it was largely due to falling US oil inventories and an upcoming  Organization of the Petroleum Exporting Countries’ (Opec) meeting to discuss a production freeze.

“The decision by Fed to hold rates yesterday seems to have weakened the dollar. As we have seen short-term strong negative correlation between oil and US dollar, Brent and WTI have both increased by 1.78% and 2% since yesterday,” said Abhishek Deshpande, chief energy analyst, global markets research, commodities, Natixis.

Opec’s meeting next week to decide on a production freeze will be crucial for the price trend.

“This a golden opportunity for Opec to strike a deal with Russia as Iran is unlikely to add additional supply without new investments,” Deshpande added.