In the ever-changing landscape of global financial markets, commodity prices have been experiencing some notable fluctuations, particularly in the case of copper and precious metals like gold and silver. The month of July saw copper prices surge by an impressive 5.5 percent, only to experience a 3 percent dip in the last few trading sessions. However, it's not just copper; various other base metals have also been following a similar trend.
As for precious metals, gold and silver have been trading at three-week lows, in stark contrast to their recent high of nearly $1980 per ounce just a fortnight ago. At present, gold prices have settled at $1935 per ounce. Silver prices, too, have shaved off around 3-4 percent as August began, indicating a somewhat weak start for metal prices in the new month.
Several factors have contributed to these price movements, and one of the key influences has been Fitch's decision to cut the US long-term rating from AAA to AA+. This move has triggered safe-haven buying, causing a surge in demand for the dollar index. Additionally, strong job numbers in the US non-farm payroll data further fueled market speculations of a potential interest rate hike before the year's end.
The global financial community is also keeping a close eye on the Bank of England's monetary policy meeting, where a 25 basis point rate hike is expected. Such decisions by central banks can have significant repercussions on the commodities market, creating an atmosphere of caution and anticipation.
For India, gold prices have faced their share of challenges, with the metal getting stuck in a cycle of constant profit-taking. Although gold prices reached an all-time high this year, this surge in value has resulted in a 7 percent decline in demand in the previous quarter. The World Gold Council has expressed concerns that demand may decrease by nearly 10 percent for the entire year due to these elevated prices and looming recession concerns.
Somsundaram PR, Managing Director of World Gold Council India, highlighted the doubling of prices between 2018 and now, and how this inflationary pressure could potentially impact the quantum of gold purchases in the future.
“Between 2018 and now, prices have doubled. So it is going to be a little hard to assume that people will continue to buy the same quantum of gold particularly when there is also inflation ary pressures,” he said.
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