Commodity markets will closely monitor China's potential for more assistance

 Commodity markets will closely monitor China's potential for more assistance

Commodity markets will closely monitor China's potential for more assistance

In the coming days, flash PMI data will become more important to the commodities market as a source of early business activity intelligence.

Markets saw a notable uptick in activity after the Federal Reserve's strongest-yet indication that it will loosen monetary policy in the next year.

Even though it was generally anticipated that the December meeting would keep things as they were, investors were pleasantly surprised by the summary of economic expectations. Officials from the Federal Open Market Committee (FOMC) have predicted no further interest rate rises for the first time since March 2021. In particular, it was predicted that the fed funds rate would drop to 4.6 percent by the end of the next year, suggesting a possible 75 basis point rate reduction. This was a considerable decrease from the earlier forecast of 5.1 percent. The market had anticipated Powell to take a more assertive stand and to put pressure on a first rate decrease, but none of those things materialized. Due to this dovish shift and Fed Chair Powell's acknowledgement of the success made in lowering inflation, a rate decrease in March is now all but certain.

In response to this announcement, the market has shown a great deal of optimism, with investors already projecting a 150 basis point rate drop for 2024. As a consequence, US 10-year Treasury rates dropped below 4 percent for the first time, and the US dollar dropped to 101.77. August. In the meanwhile, the S&P 500 reached an all-time high and the Dow Jones reached a record high, closing over 37,000 for the first time. In their last policy decisions of the year, the Bank of England (BoE) and the European Central Bank (ECB) both decided to keep their interest rates.

In the midst of these market conditions, COMEX gold reached $2062.9 per troy ounce, while silver reached $24.59 per troy ounce. Rising wagers on declining borrowing costs in March helped to drive down Treasury rates. The robust US job market statistics that was provided last week caused investors to fight back against an early rate decrease, which is why the yellow metal began the week on the down side. But after the US CPI and FOMC meeting, things were different.

Regarding market movement, it seems that both silver and gold have found support at significant levels of $23 and $2,000, respectively. Before prices rise, we anticipate some price consolidation.

Positive developments were also seen in basic metals and crude oil, with the former being helped by a strengthening forecast for global demand as a result of OPEC and IEA reports as well as notable reductions in US inventories. Beijing's relaxation of limits on house purchases helped base metals. Technically speaking, MCX Copper is exhibiting a bullish engulfing candlestick pattern that might push the price closer to Rs 745 per kg.

Future focus on the market will be on flash PMI data to get early business activity knowledge. Next week, key economic statistics including the US GDP and core PCE figures will be attentively monitored. A gentle landing is more likely if GDP slows and inflation stays low.

In addition, there will be much anticipation for the Bank of Japan's monetary policy announcement, because rumors of a departure from the bank's negative interest rate policy intensified after remarks made last week by BOJ Governor Kazuo Ueda and one of his deputies.

Markets will also be closely watching China for any more steps to bolster the economy, particularly in light of the record sums of cash that the People's Bank of China infused via one-year policy loans.