Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd
The alarming rise in cases across the globe and the fear of stricter COVID-induced lockdowns dented the appeal for gold, crude oil, and base metal. Revival led by economic stimulus indicated green shoots of economic growth, however, an alarming increase in the COVID-19 cases added to investors’ apprehensions.
Gold
Last week, Spot Gold prices dipped 1.2 percent as appreciating U.S. Dollar and the impasse over coronavirus relief fund by U.S. dented appeal for the safe haven Gold.
After multiple failed attempts over striking a deal, the U.S. administration postponed the virus relief fund until the upcoming presidential elections. Despite of a weaker labor market, the U.S. economy revived at a record pace in the third quarter of 2020, which further pressurized the yellow metal prices. However, the losses were limited as alarming increase in the coronavirus cases clouded the global economic outlook. Many nations reinforced fresh lockdown which dented the market’s risk appetite and shifted the investors towards Gold.
Appreciating U.S. Dollar ahead of the U.S. presidential elections might weigh on Gold prices.
Crude Oil
Last week, WTI Crude plunged over 10 percent as widening impact of the pandemic and recovery in Libyan Crude production weighed on the prices. The fall in prices was triggered after record number of COVID-19 cases was reported in U.S., Europe, and others which raised fears of stricter virus-led curbs and further slowdown in the global economic recovery. The losses for Oil extended further as the U.S. Energy Information Administration (EIA) reported a 4.3 million barrels rise in U.S. Crude inventory levels. Inventories surged as Crude production climbed to its highest in almost three months in the earlier week
Base Metals
Most base metals on the LME ended negative last week as strengthening of the U.S. currency and surge in the COVID-19 cases around the globe weighed on the market sentiments. No concrete signs of any additional stimulus by U.S. to help its economy tackle the pandemic supported the Dollar making the industrial metals expensive for other currency holders. After importing record levels of Aluminium in the July’20 & August’20, China’s Aluminium purchases eased in September’20 as the arbitrage window closed due to revival in the international prices. China’s September’20 imports of unwrought Aluminium and Aluminium products stood at 355,999 tonnes, down 17.1 percent from August’20.
The fall in the industrial metal prices was limited as China’s GDP grew about 4.9 percent from July’20 to September’20 as compared to the 3.2% growth reported in the second quarter of 2020. The losses for Nickel were capped as Hinatuan mine, owned by Nickel Asia Corp (a major Nickel ore producer in Philippines), suspended operations after 19 employees were tested COVID-19 positive.
Appreciating Dollar and alarming increase in the COVID-19 cases around the globe might weigh on the industrial metal prices.
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