(By Mr. Prathamesh Mallya, AVP - Research Non Agri Commodities and Currencies, Angel Broking Ltd.)
The commodities market has been impacted with the infusion of easy money by global central banks. While the COVID pandemic continues to affect the demand for commodities, the infusion of money in economies by banks is creating unprecedented demand-supply situation in the international markets.
Gold
The Gold prices observed a surge of 2 percent on Tuesday. The closing price of yellow metal on Tuesday was 2018.1 per ounce.
The appeal of the safe-haven gold was boosted in the market due to expectations regarding more stimulus from the United States. Gold was pushed above the 2000 level mark due to the depreciating U.S. dollar conditions and expectations of more stimulus.
The cheap money infusion by global central banks to combat pandemic caused economic slowdown has also been another reason behind the rise of gold prices.
Crude Oil
The outlook for Oil was underpinned due to the expectations of the U.S. introduced new economic stimulus package.
The WTI Crude prices ended higher on Tuesday by 1.84 percent only to close at $41.0 per barrel. Despite the second wave of coronavirus, the oil prices were supported by the expansion in the manufacturing aspect of companies in the countries with the biggest economy in the world.
According to the Institute of Supply Management, in July of 2020, the highest amount of activities was recorded U. S factories in the past 18 months. The crude oil price elevation was also due to the expansion of manufacturing activities in Asia and Euro-zones.
However, the gains for crude oil are limited due to OPEC, and its allies have reduced their output cuts by 1.5 million barrels for this month because of the prevailing fear of oversupply. This decision is estimated to lower the price of crude oil in the market.
Base Metals
The highest gainer among the pack on Tuesday’s LME base metal was Aluminium. The Aluminium prices were supported by the revival of the auto industry and China’s rising demand for the metal. However, the outlook for Aluminium was underpinned due to the shifting of demand towards the electronic vehicle segment. But there is hope, for it is assumed that there might be a surge of Aluminium consumption in electric vehicles in the coming years.
The industrial metal prices were supported by robust factory data posted by U.S., Asian and Eurozone countries. The depreciating U.S. Dollar factor also supported the industrial metal prices in the market.
Copper
LME Copper prices on Tuesday ended higher by 1.20 percent and closed at $6490.0 per tonne. The outlook of red metal was underpinned due to the upbeat economic data posted by China.
A drop in copper output of 20.4 percent was witnessed in the first half of 2020 by Peru, the world’s second-largest copper manufacturer.
Industrial metal prices are estimated to be pressurized due to the widening impact of coronavirus. And the red metal prices might be pressurized due to the increase in copper production in Chile and Peru.
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