Gold prices may face headwinds from strong dollar, rising yields
Gold ended last week on a lower note, dropping to a two-week low due to a stronger dollar and higher bond yields, said Prathamesh Mallya, DVP- Research, Non-Agri Commodities and Currencies, Angel One. The dollar surged to a near two-month peak, making gold more expensive for non-dollar holders, while U.S. 10-year yields reached a near two-week high.
may remain under pressure due to a stronger and higher bond yields, despite ongoing support from global and expectations of , the analysts feel, adding that silver might touch Rs 1 lakh per kg this year. The outlook for other base metals remains muted due to surplus in supply.Gold ended last week on a lower note, dropping to a two-week low due to a stronger dollar and higher bond yields, said Prathamesh Mallya, DVP- Research, Non-Agri Commodities and Currencies, Angel One. The dollar surged to a near two-month peak, making gold more expensive for non-dollar holders, while U.S. 10-year yields reached a near two-week high. Despite the decline, global physically backed gold ETFs saw inflows of $212 million (2.1 metric tons) last week, according to the World Gold Council. Non-yielding bullion, which hit a record high on May 20, remains up 12% this year, supported by expectations of Fed rate cuts and significant central bank purchases amid geopolitical tensions. Traders are currently pricing in a 66% chance of a Fed rate cut in September, according to the CME FedWatch Tool, Mallya said.
He said that gold may remain under pressure due to a stronger dollar and higher bond yields, despite ongoing support from global ETF inflows and expectations of Fed rate cuts.
Added Pranav Mer, Vice President, EBG - Commodity & Currency Research, JM Financial Services Ltd "Gold is seen stuck in a range holding support around 71200/ 70800, while on the upside resistance is seen at 71700-71850. Momentum in bullion looks consolidative ahead of the U.S. Fed chairman's speech and the minutes of the Fed's last meeting due on Wednesday and U.S. NFP data on Friday"
"We anticipate a consolidated move in the prices in the current month with a corrective bias to occur amid a data-dependent approach to persist in the yellow metal. Having said that gold could average below $ 2300 per ounce in the current month (CMP $ 2329 per ounce) with supports to persist in the range of $ 2250 – 2270 per ounce. On MCX this could translate to supports of Rs. 70,280 – 69,450 per 10 gm levels," said Naveen Mathur, director, commodities & currencies, Anand Rathi Shares & Stock Brokers.
"Meanwhile we remain bullish on Silver prices for the rest of the year as anticipated rise beyond Rs. 1,00,000 per kg levels could still occur in the later half of the year considering structural deficit forecast, strong investment demand amid declining inventories to provide support to prices," mathur said.
Weakening demand for copper is leading to rising inventories, with the uncertain outlook for China’s property sector likely to continue exerting downward pressure on the market. The commodity-intensive stimulus will be necessary to support short- to medium-term demand growth, potentially creating short-term pressure on copper prices. However, the copper market is expected to tighten significantly in the second half of 2024 due to several key factors. Major copper mines like Escondida in Chile and Codelco's operations are facing declining ore grades and production challenges. Copper demand is projected to grow at a compound annual rate of 8.6% between 2022 and 2030, driven by the green energy transition. Additionally, the copper concentrate market is tightening, with spot copper treatment charges (TCs) down nearly 40% in Q1 2024 and turning negative in Q2. Demand forecasts also highlight growth from sectors such as data centers and AI, further contributing to the tightening market outlook.
The aluminium market is expected to tighten significantly in the second half of 2024 due to several key factors. Supply constraints are anticipated to limit aluminium production, primarily due to power issues in China's Yunnan province and tighter EU sanctions on Russian aluminium. Unplanned supply disruptions at aluminium smelters have also been a recurring issue. Meanwhile, aluminium consumption is projected to remain strong, driven by robust demand from the renewable energy and electric vehicle sectors. As a result of these supply limitations and increasing demand, aluminium prices are forecast to rise in the latter half of 2024.
The zinc market is expected to remain in a surplus position in the second half of 2024, driven by several key factors. Global zinc mine production is forecasted to increase by 3.9%, with significant growth in Australia, Brazil, Russia, China, and Mexico. Refined zinc metal production is anticipated to rise by 3.3% to 14.3 million tons, resulting in a global surplus of 400,000 tons.
This supply growth is set to outpace the projected 1.7% increase in global zinc consumption, primarily driven by China and India, while demand elsewhere is expected to decline. Rising zinc inventories in LME and SHFE warehouses indicate an oversupply relative to demand. Although temporary supply disruptions, such as Glencore's McArthur River mine closure, may support prices in the short term, the overall surplus is likely to keep zinc prices subdued in the second half of 2024.
