Spot Gold prices were trading in the green, hovering around $1235/oz till 4.00 pm IST today. The yellow metal prices had declined sharply yesterday on the back of positive sentiments in the financial markets. However, risk aversion has set its tone in the markets today, which helped gold prices to gain. S&P slashed its economic growth forecasts for Spain yesterday. Concerns over a sovereign default in the Eurozone are haunting the investor sentiments. The Asian as well as the European markets tumbled today after posting strong gains in the last week.
Copper prices came under pressure today taking cues from the movement in the US dollar index (DX). Risk aversion in the financial markets led to higher demand for the DX as a safe-haven. The stronger DX exerted pressure on the copper prices. Copper inventories declined marginally by 100 tonnes today. But this positive sentiment was faded by a simultaneous decline in cancelled warrants – the metal booked for removal from the LME warehouse.
Crude oil prices lost more than 1% on the Nymex till 4.00 pm IST today as the stronger DX made the commodity prices look unattractive for holders of other currencies. Another concern for the crude oil prices is the increasing inventories in the US. Increasing inventories in the world’s largest consumer is denting the short-term outlook.
Outlook
On the macro-economic front, the US authorities are expected to announce economic data on existing home sales and Richmond manufacturing index today. Economic data from the world’s largest economy has been very poor since the last week, which is leading to concerns over the strength of the economic recovery. However, a close watch for today is the emergency budget of UK which is scheduled to be announced in the evening.
The new PM David Cameron has already stated that strong austerity measures are needed to curtail the huge fiscal deficits. We expect the DX to remain strong in the evening trade. Copper as well as crude oil prices will continue to trade with a negative bias facing pressure from the stronger DX. Gold prices will gain today as risk aversion in the markets will lead to higher demand, as the yellow metal is treated as a traditional safe-haven investment.
