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commodity-update

COMMODITY MARKET UPDATES FOR DECEMBER 16, 2016

Gold futures closed lower in the domestic market on Thursday as the first U.S. interest-rate hike in a year and the prospect of a more-aggressive Federal Reserve weighed on precious metals.

The knee-jerk drop in gold “was a response to the statement suggesting the Fed could raise rates perhaps three times in 2017, rather than to yesterday’s hike.

Higher interest rates typically make the dollar stronger, which can put pressure on commodities that are pegged to the currency, such as gold. In addition, noninterest-paying assets like gold lose their luster as interest rates increase.

At the MCX, gold futures for February 2017 contract ended at Rs 27000 per 10 grams, down by 2.13 per cent, after opening at Rs 27,401 against a previous close of Rs 27,587. It touched the intra-day low of Rs 26,901.

Silver futures closed lower in the domestic market on Thursday as participants engaged in trimming their positions taking weak cues from global market. Marketmen attributed the fall in silver prices at futures trade to a weak trend in the precious metals overseas and profit-booking by participants at existing levels.

At the MCX, silver futures for March 2017 contract closed at Rs 39,120 per kg, down by 6.25 per cent, after opening at Rs 41,301, against a previous close of Rs 41,728. It touched the intra-day low of Rs 39,120.

Crude oil futures closed lower in the domestic market on Thursday as the dollar rallied following an increase in U.S. interest rates.

A stronger dollar, in which oil is traded, tends to hit crude demand as it makes fuel purchases more expensive for users of other currencies.

The Organization of the Petroleum Exporting Countries and other producers led by Russia have promised to cut production by almost 1.8 million barrels per day (bpd) in an attempt to clear a global oversupply that has depressed prices for more than two years.

At the MCX, crude oil futures for December 2016 contract closed at Rs 3489 per barrel, down by 0.23 per cent, after opening at Rs 3491, against a previous close of Rs 3497. It touched the intra-day low of Rs 3391.

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