Investors remain focused on what US Federal Reserve Chair Jerome Powell might say on Friday about tapering the central bank's bond-buying program when he speaks at the Jackson Hole symposium. Oil prices rose more than 1 percent on Wednesday, extending gains for a third session, after the U.S. government data showed that fuel demand climbed to its highest since the start of the COVID-19 pandemic. Brent crude rose 1.7 percent to settle at $72.25 a barrel. Gold slid over 1 percent, retreating further below the $1,800 level ahead of the Jackson Hole symposium. To understand what all of this means for commodities, CNBC-TV18 spoke to David Lennox, analyst at Fat Prophets.

On commodity prices, Lennox said, “Certainly, everyone is watching what is going to come out of Jackson Hole. We certainly do think that the rhetoric’s not going to change too much from what we have seen already, that they are obviously still calling that inflation is going to be trajectory, but they have put somewhat of a timeline around when they thought we would start to see more positive action on the monetary front. So overall, we think what we will see is that they will suggest that yes, they are looking at perhaps winding back the cuts, and they are going to look at perhaps raising rates sooner rather than later.”

He added, “But if you have a look at the inflationary rate, we saw June come in at a surge, we saw July come in quite flat. So from a federal perspective, they will probably be thinking that yes that is certainly looking the way that we would think if it was going to be transitory. So overall, markets are probably a little bit confused. But provided, we still see significant spending come through on the infrastructure and stimulations coming out of government, we are going to see the commodities prices remain somewhat stirred over the next couple of months.

On metals and steel, Lennox said, “Certainly, there have been concerns over what is happening inside China, will that country going to continue to grow at the rate at which it had been growing. We do believe that it will slow down, that is certainly going to happen. But within that we have seen, their steel industry managed to survive quite well, in terms of a slowing Chinese environment and that is primarily because their steel industry has got a domestic focus, but also has quite a significant export focus. We do believe that is where the steel sector is managing to survive quite nicely. They will have also got some reprieve from the collapse that we have seen or not the collapse, but certainly the fall that we have seen in the iron ore price over the last couple of weeks that will give them some margin increase. So from that perspective, we expect the steel industry will continue to move quite nicely on a firm trajectory to the upside and with that, certainly demand for iron ore should follow suit over the next few months.”

Text inputs from Reuters

For full interview, watch accompanying video.

(Edited by : Dipika)