Rate cut a plus for some commodities, but demand and supply forces will still be key

THE commodity sector in general will be supported by the Federal Reserve’s 50 basis point cut as lower rates would reduce opportunity costs for the asset class, increase trading activities and support prices quoted in US dollars.

However, the impact of the rate cut is limited by market fundamentals and structural factors that play more important roles in shifting commodity prices, said market analysts.

Gold prices, which were propelled by market expectations on Fed rate cuts, might be consolidated despite further upside, said Bank of Singapore’s commodity and currency strategist Sim Moh Siong.