The Hindu Business Line : Metals rise as Fed signals end to interest rate hike

Market trends
Gold rose by 1.6% to Rs 9,010 for 10 gm for August contract on MCX.
September contract for silver was up 2.5% to Rs 15,545 per kg.
June contract of zinc zoomed by 4% to Rs 150 a kg; copper up 1.5 per cent to Rs 354.

Kolkata. June 30

A favourable decision from Federal Open Market Committee in the US on bond rates led to a flare-up of metals in the commodities market on Friday. The US Federal Reserve on Thursday decided to hike the interest rate but signalled an end to the two-year campaign of rate hike.

The Federal Reserve hiked its benchmark rate by just 25 basis points against expectations for a steeper hike of 50 basis points and a more hawkish tone for the Fed's course of action for the future rate hikes.

Analysts and portfolio managers are expecting the short-term market to remain bullish, leading to profit taking.

The stabilisation is expected in the medium term by September or early October.

Domestic trend

Following the trend of global commodity markets, gold rose by 1.6 per cent to Rs 9,010 for 10 grams for August contract on Multi Commodity Exchange (MCX). The September contract for silver was up by 2.5 per cent to Rs 15,545 per kg.

The June contract of zinc zoomed by four per cent to Rs 150 per kg and copper moved by 1.5 per cent to Rs 354.

Crude oil is more governed by geo-political issues and was marginally down. Agri-commodities are governed by local issues.

According to Mr Anuj Gaur, analyst of R R Commodities, gold is expected to move up to Rs 9,145-9,150 in the short-term before registering a downward correction due to profit taking. The support price is set at Rs 8,850.

Silver September contract may move up to Rs 17,200 and the resistance level for downward correction is set at Rs 16,235.

Zinc may reach anywhere between Rs 155-165 and copper may hit Rs 375 on MCX.

Sentiment driven

Describing the market move as primarily sentiment driven, Mr Anand Singhania of Prompt Securities, said the 0.25 basis point rise in Federal rates was expected and was discounted.

However, the market was anticipating a steeper hike in rates and reacted positively on being proved wrong.

"Market will move upwardly in the short-term. The long-term movements would be predicted only if the old highs are surpassed," he said.

The commodities market is likely to witness hectic activity from Wednesday as markets in the US will be closed on Monday and Tuesday.

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