Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd
Owing to a consistent decrease in the dollar index and ever-increasing coronavirus cases, there has been a surge in yellow metal and crude oil prices. The decline of China’s steel inventories and the recent shutdown of some plants in Tangshan city have caused a drawdown in the stocks. Yet, Lead and Tin managed to recover among the building decline.
Gold
In the last week, Spot Gold prices ended higher by 2.8 percent, and an increase in MCX was also seen on account of profound weakness in the dollar index and mounting cases of coronavirus across the globe. A rise in demand due to partial lockdowns in many countries, along with further support by central banks, is expected to aid gold prices in the future as well.
The U.S. Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell have urged Congress for the approval of the COVID-19 relief fund without any delay. He has also asked Congress to consider extending some of the emergency unemployment benefit programs used by around 11 million workers. These programs are due to expire at the end of this month in absence of any Congressional action.
Crude Oil
WTI Crude also gained over 1.6 percent as depleting U.S. Crude inventory levels coupled with rising bets on a potential vaccine boosted oil prices last week.
During the week, a rise in the oil prices was seen with OPEC and Russia’s agreement for a modest output increase of 500,000 barrels per day from January.
OPEC and Russia, a group known as OPEC+, will keep production cut at 7.2 million BPD from the current levels of 7.7 million BPD.
U.S. crude oil inventories also stood at -0.7 M against the expected inventory of -1.7 M and the previous reading of -0.8 M.
Base Metals
Base metal on the LME ended positively except for Lead. Upbeat Chinese manufacturing data and a weak dollar elevated most of the base metal prices during the week.
This week, the Chinese factory and services data pointed to a sustained recovery in the world’s top consumer of metals and the second-largest economy.
Meanwhile, China’s steel inventories have declined substantially from a seasonal record high of 12.92 million tonnes. It was slightly above the five-year seasonal average at 10.46 million tonnes. Strong end-user demand and the recent shutdown of some plants in China’s top steelmaking city of Tangshan may have led to the rapid drawdown in stocks.
Tin demand is recovering, aided by rising electronics sales, as more people stay at home because of the COVID-19 pandemic. It is set to increase by about 6% next year, the International Tin Association forecasted.
Copper
LME Copper ended higher by 3.5 percent as hopes over a potential vaccine and depleting LME inventory levels supported the red metal prices.
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