Fed's dovish stance supports metals and crude oil

Trend to continue in near term on dollar's weakness

The US Federal Reserve’s dovish stance on interest rates triggered a global rise in commodity prices on Thursday. Three-month copper on the London Metals Exchange (LME) opened with a 2.5 per cent gain after the Fed flagged fewer interest rate hikes this year because of a fragile global economy.

On the Multi Commodity Exchange (MCX), copper prices rose by 1.43 per cent in early evening trade to Rs 339.40 per kg.

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A rebound in commodity prices was anticipated after producers started shutting down facilities to avoid losses. Experts, however, are hesitant to confirm that prices have bottomed out.

“On Thursday, LME copper popped back above the $5,000 mark. Gold also joined the move after rallying 2.5 per cent in the previous session,” said Naveen Mathur, Associate Director (commodities and currencies), Angel Broking.

Crude oil jumped to trade at $41.14 a barrel early on Thursday. Crude oil has rallied over 50 per cent after breaching a 12-year low level of $27.12 a barrel in January.

Organization of the Petroleum Exporting Countries (Opec) and non-Opec producers, including Russia and Saudi Arabia, are meeting in Qatar on April 17 over a plan to freeze output. Once finalised, these oil-producing nations will try to convince Iran to follow suit.

“Base metals and energy were waiting for a trigger for a price rebound. The Fed stance has offered that. The trend is likely to continue till the Fed presents new data in April. After that, profit booking cannot be ruled out,” said Gnanasekar Thiagarajan, Director, Commtrendz Research.

Gold jumped by nearly one per cent in London to $1,170 an oz on Thursday. Silver followed to trade at $15.72 an oz. In Zaveri Bazaar, gold jumped by over 1.2 per cent, or Rs 340, to close at Rs 29,175 per 10 gm.

“The dollar is expected to become weaker, translating in a rise in commodity prices,” said Jayant Manglik, president (retail distribution), Religare Equities.

Thiagarajan said gold could hit $1,300 an oz (Rs 30,000 per 10 gm) and silver $16 an oz (Rs 40,000 a kg) in the near term.