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Informist, Tuesday, Dec. 10, 2024

 

By Sandeep Sinha

 

MUMBAI – Gold prices are expected to stabilise around $2,700 an ounce in the near term, according to Riya Singh, research analyst for commodities and currency at Emkay Global Financial Services Ltd. Current market prices support gold's appeal as a safe-haven asset, but for gold prices to rise, there needs to be a significant recovery in retail jewellery demand, particularly in key markets like India and China, she said.

 

Tuesday, the most-active February gold contract on the COMEX was $2,714 an ounce, while the same-month gold contract on the Multi Commodity Exchange was INR 78,204 per 10 grams.

 

"Unless retail demand for pure gold jewellery picks up, sustainability at elevated price levels will be challenging," Singh told Informist in an interview. She noted that current high prices have shifted consumer preference to jewellery of lower carat, dampening demand for pure gold. "Gold prices need to correct slightly to attract retail participation," she added.

 

However, Singh remains bullish on the metal given that it has established a strong base around $2,400 an ounce. She sees prices rising to $2,900 an ounce by March if they stay above $2,700 an ounce.

 

Singh said silver continues to be supported by industrial demand, despite recent headwinds. She said that China's softer industrial data and uncertainty over US policies under Donald Trump's presidency have slowed the rise in prices of silver to that of gold.

 

"While the solar energy narrative supports long-term demand, retail participation is critical for sustainability," Singh noted. She expects silver prices to remain steady in the short term, without significant downside, as safe-haven and industrial demands balance each other.

 

China's pledge of a 'moderately loose policy' next year to support its economy and rising demand for green energy in India is likely to support demand for silver. However, it will take at least six months for the sparkle to come back, Singh said.

 

On the gold-silver ratio, Singh believes it will stay around the 85 level in the near term and not fluctuate much. The ratio has surged from a low of 78.79 touched on Oct. 22 to 87.13 on Nov. 28 as investors preferred the safety of gold. The gold-silver ratio, which measures the ounces of silver required to buy an ounce of gold, is currently at 84.3.

 

The outlook on base metals remains mixed. Singh sees copper prices between $9,000 and $9,500 per tonne on the London Metal Exchange. She attributed the sluggish demand for the red metal to China's lack of significant stimulus measures and lower production forecasts from Codelco, the world's largest copper producer. The three-month copper contract on LME was $9,179.5 per tonne.

 

Aluminium faces challenges from a potential supply glut on the Shanghai Futures Exchange, while recovery in manufacturing demand remains pivotal for price support. Singh said that for aluminium prices to move higher, one needs to see a recovery in China's manufacturing activity and that will only happen when demand improves.

 

Singh expects Brent crude oil prices to range between $68 and $72 per barrel. "OPEC's output cuts and reduced demand growth expectations have capped prices," she said.

 

The Organization of the Petroleum Exporting Countries has revised downward global oil market growth forecast for 2024 and 2025 because of weak demand. In its October oil market report, the cartel trimmed global oil demand growth by 107,000 barrels to 1.8 million barrels per day in 2024 and to 1.54 million barrels per day in 2025 from 1.64 million barrels per day.

 

Slowdown in demand for crude from China and rise in supply from non-OPEC countries is a major reason for the glut in the global market. Trump's threat to impose fresh sanctions on Iran could support crude oil prices temporarily but is unlikely to shift the overall demand-supply balance significantly. The price of West Texas Intermediate crude oil was $68.30 per barrel, and that of Brent oil on the Intercontinental Exchange was $72.10 per barrel.

 

Singh said the dollar index is likely to remain strong in the short term, supported by uncertainties around Trump's economic policies and their impact on global markets. However, she foresees a reversal as liquidity increases in the US economy, pressuring the dollar.

 

The dollar index, which measures the strength of the greenback against a basket of six major currencies, has risen nearly 3% to 106.35 since Nov. 5 after Trump won the US presidential election. A firm greenback makes dollar-denominated commodities, such as base metals and precious metals, expensive for buyers holding other currencies, thus dampening demand.

 

"Increased liquidity, combined with an expanded debt ceiling, could weaken the dollar's strength in the long term," Singh said. This cautious yet balanced outlook reflects the complexity of global market dynamics across commodities and currencies.  End

 

US$1 = INR 84.85

 

Edited by Ashish Shirke

 

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