Commodities Daily - August 1, 2019

> Oil slides after Fed meeting despite rate cut, bullish EIA data and drop in OPEC production. Today, the spotlight data-wise will be on the July reading of the US ISM manufacturing index due at 17:00 Moscow time, which the Bloomberg consensus expects at 52.0. The gauge has been in sharp decline since mid-2018 amid a deteriorating global manufacturing outlook and was down to 51.7 in June. A slightly downbeat reading could cause Brent to fix within the $64-65/bbl range today despite the array of recent upbeat fundamental developments and releases.> Gold under pressure following Powell's remarks. Yesterday, after it was announced that the Fed had decided to lower rates by 25 bps, as expected, Chairman Jerome Powell said that that the move should be treated as a "mid-cycle adjustment" and "not the beginning of a lengthy cutting cycle." This took the gold market by surprise, as in May investors had begun to anticipate a new cycle of easing unfolding over 2019-20, which caused gold prices to rise nearly $100/oz in recent weeks. We expect gold prices to continue falling in the wake of Powell's not-so-dovish comments. It is possible gold could approach the $1,400/oz mark by the end of the day. > Base metals sell off amid stronger dollar following Fed decision. This morning, zinc is down 2.0%, nickel 1.1% and copper 0.4%. We think that the selloff in base metals is more of an emotional reaction and will prove temporary, particularly given that this summer's rally in financial markets essentially bypassed base metals. The main points of focus for investors are the state of the Chinese economy and how the US-China trade talks are proceeding. The current support levels are $5,850/tonne for copper, $14,000/tonne for nickel and $2,350/tonne for zinc.