Mumbai (Maharashtra) [India], November 5 (ANI): Global commodity and currency markets are witnessing a significant shift following the outcome of the US midterm elections, with declining oil risk premiums, a weakening US dollar and a sharp rally in gold and silver reshaping the macroeconomic landscape.

Speaking to ANI, Anindya Banerjee, Head of Commodities Research at Kotak Neo, outlined how geopolitical developments and shifting market sentiment are influencing short-term asset price movements.

Brent crude has declined towards USD 93 per barrel as expectations of an immediate escalation in geopolitical tensions ease. However, Banerjee cautioned that structural supply risks remain unresolved.

'The current risks continue. The logjam in West Asia, especially around Hormuz, remains. The threat of the Houthis in the Red Sea remains. And Ukraine continues to attack the Russian refinery complex,' Banerjee said.

He added that the decline in crude oil prices is primarily driven by markets pricing out the possibility of an immediate escalation.

'The geopolitical, immediate war premium is gone. Supply risks remain. So that's why for oil to go below $80, $85, it is difficult,' he noted, highlighting USD 85 per barrel as a strong baseline.

Meanwhile, the Indian rupee is finding support from political developments in Washington. The US Dollar Index fell to a five-week low following the midterm election results, creating favourable conditions for emerging market currencies and foreign equity inflows.

'After the US midterm elections, one thing looks quite likely in America: political uncertainty will increase significantly,' Banerjee said.

He emphasised that a weakening dollar, combined with global profit-booking in mega-cap technology and artificial intelligence (AI) stocks, could make India an attractive investment destination.

'India is seen as a place which is well-diversified and beyond AI. So that can also bring in the flows,' he said.

Banerjee noted that the USD/INR trading range has narrowed to 94-97, with the possibility of the rupee strengthening towards 92 against the US dollar if foreign inflows accelerate and the Reserve Bank of India (RBI) refrains from aggressive dollar purchases.

Meanwhile, the holiday season has brought renewed momentum to precious metals. With US interest rate hike expectations stabilising alongside easing energy costs, gold and silver could witness a strong upward movement towards the end of the year.

'The political risk premium in America is rising, and that's going to rise significantly. So that is chaotic for the dollar, excellent for gold and silver,' Banerjee said.

He observed that speculative long positions have largely been cleared out, leaving the market relatively light and positioned for further gains.

According to Banerjee, domestic gold prices on the Multi Commodity Exchange (MCX) could rally towards Rs 1,55,000-1,56,000 per 10 grams, while silver prices could test Rs 2,05,000-2,10,000 per kg.

On monetary policy, Banerjee indicated that imported inflationary pressures could prompt one final 25-basis-point rate hike by the RBI before a sustained pause in the monetary tightening cycle. (ANI)