Home Markets Appreciation Dollar Dents the Appeal for Gold, Base Metals, and Crude Oil

Appreciation Dollar Dents the Appeal for Gold, Base Metals, and Crude Oil

by Prathamesh Mallya (AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd.)
Oct 29, 2020

An appreciating Dollar, along with an alarming increase in the new coronavirus cases in the U.S., Russia, Europe, and other countries negatively affected the Gold, Crude Oil, and Base metal prices. Crude Oil prices lowered further on account of increasing U.S. inventory amid bleak global demand.

Gold

Gold declined over 1.5% and closed at $1877.1 per ounce on missing signs of additional stimulus aid by the U.S., which supported the Dollar and made the yellow metal less appealing for other currency holders.

After multiple failed sessions with the Democrats, President Trump finally agreed on the relief fund, which will happen after November’20 elections.

Fresh pandemic triggered curbs in Europe and weighed down the Euro, further strengthening the U.S. currency.

Even investorstook shelter under the U.S. Dollar, as an alarming increase in coronavirus cases across the globe clouded the global economic outlook.

President Donald Trump’s statement of an agreement post the November’20 elections slashed the hopes over an additional coronavirus relief fund, underpinning the Dollar, which might weigh down Gold. Gold prices are expected to trade lower on MCX in today’s session.

Crude Oil

WTI Crude tripped down rapidly at 5.5% and closed at $37.4 per barrel as worries over the pandemic surge. The coronavirus cases in Europe and the U.S. dampened the outlook for Crude.

Oil prices dipped as the number of COVID-19 cases increased in the U.S. and Russia. The fresh virus-led curbs in many European countries might further slow the global economic recovery and dent the Crude prices.

U.S. Energy Information Administration reported a 4.4 million barrels increase in U.S. Crude inventory levels. U.S. Crude production surged to the highest in three months during the last week, further extending oil price losses.

During the last trading session, oil prices gained momentum as Hurricane Zeta forced the closure of oil production capacities on the Gulf of Mexico to avoid any damage. However, worries over increased supply and bleak demand prospects in the global oil market overshadowed prospects, and led to the decline.

The closure of U.S. Oil Production capacities might levy some support to Crude. However, a surge in U.S. inventory levels during the pandemic might cap the gains. Oil prices are expected to trade lower on MCX in today’s session.

Base Metals

Most of the base metals on LME ended in the red, as a rapid increase in coronavirus cases across the globe shifted the investors towards the Dollar.

Increasing cases in the U.S., Russia, Europe, and many other nations raised fear of fresh lockdowns among investors and dented the demand for industrial metals.

Nickel prices found some support as Hinatuan mine owned by Nickel Asia Corp suspended operations.

China’s industrial companies reported profits for the fifth consecutive month, indicating an economic recovery by the world’s biggest metal consumer. However, the growth slowed down in August’20 due to a surge in raw metal prices and a sharp decline in factory-gate prices.

Copper

LME Copper ended lower by 0.74% and closed at $6748 per tonne amid a stronger U.S. Dollar. Worries over fresh coronavirus cases further weighed down the red metal prices.

An appreciating Dollar and increasing coronavirus cases might further weigh down industrial metal prices. Copper prices are expected to trade sideways on MCX in today’s session.