How will a weak rupee-dollar impact crude oil, gold and base metals?

Rushabh Maru

The rupee on Friday recovered from its all-time low of 69.09 per dollar it had touched on Thursday but continued to trade weak.

Here's how a weakening rupee-dollar will impact gold, crude oil and base metals:

Gold prices declined sharply in dollar terms this year on account of strength in the dollar index. However, in euro and pound terms, gold prices have changed a little. The tight monetary policy of the Federal Reserve poses a strong challenge to the yellow metal.

We have been seeing selling pressure in the SPDR and iShares Gold Trust exchange traded fund despite trade war-related concerns in global markets. On the other hand, the rupee has depreciated to an all-time low-level today.

Due to the rupee depreciation, prices may not fall drastically in the domestic market. If India sees a normal monsoon this year, it might lead to a rise in the rural demand ahead of the festival season.

Hence, prices may reverse in September-October period due to positive demand from India. Hence, Rs 30,000 per 10 gram might offer strong support to gold on the MCX.

We have seen a dramatic rise in the crude oil prices in the last couple of months due to geopolitical concern. There are supply issues from countries like Venezuela, Libya, and Canada. The US has asked countries to cut imports of Iranian oil from November.

So, the crude oil prices are moving higher in the international market. On the other hand, the rupee has depreciated to all-time lows. As a result, crude oil prices touched Rs 5,000 on the MCX on Wednesday.

The rupee is expected to depreciate in coming sessions due to steady capital outflows and worsening macro-economic conditions. Hence, we expect crude oil prices to trade in a Rs 4,800 to Rs 5,200 range on the MCX in coming sessions.

Base metals are under pressure in the international market due to tight monetary policy of the Federal Reserve. As a result, the dollar index is trading near multi-month highs.

On top of this, trade war concerns are heightened between the US and its allies. Because of all these factors, base metals are under pressure in the international market.

However, the rupee is depreciating sharply against the dollar. As a result, base metals on the MCX are not falling as much as they are falling in the international market.