Commodity traders to closely watch China’s key political meeting, US retail sales next week – Moneycontrol

WTI Crude oil dipped below $81 per barrel earlier in the week as concerns about supply from Hurricane Beryl eased.

By Kaynat Chainwala, AVP-Commodity Research, Kotak Securities

Slowing inflation following weak jobs report earlier this month has increased expectations for a Federal Reserve interest rate cut, with traders now pricing in a 94 percent chance of a cut in September. Fed Chair Powell, in his testimony, acknowledged the cooling labour market and progress in controlling inflation, emphasizing that the central bank does not require inflation to drop below 2 percent before considering rate cuts.

Meanwhile, San Francisco Fed President Mary Daly expects further easing in price pressures and the labour market, supporting the case for rate cuts. Chicago Fed President Austan Goolsbee believes the US economy is on track to achieve 2 percent inflation. US headline inflation slowed more than expected to a one-year low of 3 percent in June, while the annual core measure dropped to a three-year low of 3.3 percent, prompting US equities to reach new record highs and pushing the US dollar to a five-week low of 104.04.

COMEX Gold prices jumped to $2422 per troy ounce, as signs of softness in the labour market and ongoing disinflationary trends improved the conviction that the Fed might pivot to rate cuts soon, sending 2-year and 10-year treasury yields to the lowest since March.

On the four hourly charts, MCX Gold (Aug) has given an upward breakout of its ‘Double Bottom’ chart pattern affirming bullish control. In addition, on the daily chart, the price has closed above its previous swing high of Rs 73,149 per 10 grams. Next resistance for the counter is placed at Rs 73,780 above which major resistance is placed at Rs 74,400.

Silver gained momentum with Gold, surpassing the $32 per troy ounce mark but closed the week 1 percent lower near $31 per troy ounce owing to weakness in base metals. LME base metals faced pressure due to subdued market expectations regarding a policy shift from the Third Plenum coupled with lacklustre domestic demand highlighted in China’s trade data.

WTI Crude oil dipped below $81 per barrel earlier in the week as concerns about supply from Hurricane Beryl eased. However, oil prices rebounded sharply to $83.74 per barrel and nearly erased the weekly decline, supported by indications of improved fuel demand in the US during the summer travel season and expectations of an imminent Fed policy pivot. Furthermore, the EIA increased its 2024 demand estimate to 1.11 million barrels per day (bpd) from 1.08 million bpd, and OPEC maintained its strong oil demand growth forecast of 2.2 million bpd for 2024. In contrast, the IEA lowered its 2025 oil demand growth forecast to 980,000 bpd from 1 million bpd, citing weak consumption in China.

Next week, US retail sales figures for June, expected to decline 0.3 percent month-over-month according to Bloomberg forecasts, are anticipated to reflect another month of weak spending due to slowing average hourly earnings growth and consumer caution. Additionally, the ECB policy meeting will be closely watched for hints on the timing of the next rate cut, although it is likely that policymakers will leave rates unchanged this month. Metals may continue to face pressure as key economic indicators from China are expected to underscore slowing activity. Most importantly, traders will closely watch China’s once-in-five-years key political gathering (July 15 – 18) to see if the country addresses the persistent property crisis and cautious consumer spending, even though the event primarily focuses on longer-term political and economic reforms.

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