Gold and base metals suffer as rupee depreciates
With the value of the Indian rupee depreciating against the dollar exchange rate, prices of crude oil have almost touched Rs 5,000 per barrel on the MCX on Thursday, but prices of other commodities have remained steady or not seen a drastic fall in the domestic market.
The change in the rupee-dollar index has directly impacted crude oil, base metal and the gold markets. The strengthening of the dollar index in the current year has prompted gold prices to fall.
Although fear of the trade war looms over the market, there has been pressure to sell Standard and Poor’s depository receipt (SPDR) and exchange-traded funds (ETFs).
The domestic commodities market has, however, not declined as much with the rupee's depreciating value. It is predicted that, with a good monsoon this year, gold products will see a higher demand in the rural areas before the festive season. Prices are likely to reverse in September-October, and the Rs 30,000 per 10gm slab will see good support on the MCX.
With supply blocked from oil-producing Venezuela, Libya and Canada, crude oil prices have shot up in the international market. The steady capital outflows and worsening macroeconomic conditions are expected to depreciate the rupee’s value further and crude oil is expected to trade between Rs 4,800 and Rs 5,200 on the MCX.
While base metals have come under pressure in the international market following the US Federal Reserve’s tight monetary policy, its prices have not fallen as much on the MCX as compared to the international market. The depreciation of the rupee has kept the base metal prices steady in the domestic market.