Home Markets Weaker Dollar supports Gold and Base Metals; surge in Libyan Oil Production weighs down Crude

Weaker Dollar supports Gold and Base Metals; surge in Libyan Oil Production weighs down Crude

by Prathamesh Mallya (AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd.)
Oct 20, 2020
Weaker Dollar supports Gold and Base Metals; surge in Libyan Oil Production weighs down Crude, Market, KonexioNetwork.com

A weaker U.S. Dollar extended support to Spot Gold and Base Metal prices that ended in the green. China’s increased economic activities further supported industrial metals. Crude Oil ended marginally lower amid increased Oil Production and widening impact of the pandemic.

Gold

Spot Gold ended higher by 0.28% and closed at $1,904.3 per ounce amid weakening Dollar that made the yellow metal cheaper among other currencies.

The U.S. Dollar weakened as House Speaker Nancy Pelosi continued hopes for a new coronavirus relief fund by the U.S. before the upcoming presidential elections.

Gold, which is considered as a hedge against inflation and currency debasement, gained over 25% in 2020 on account of lower interest rate and an enormous amount of liquidity infusion by the global central bank.

Furthermore, reinforcement of the pandemic triggered curbs in Europe and global coronavirus cases surpassing 40 million boosted the appeal for the safe haven, Gold among investors.

However, uncertainty over additional corona relief fund might weigh down prices for the yellow metal.

Crude Oil

WTI Crude ended marginally lower by 0.12% and closed at $40.8 per barrel as the impact of the pandemic widened. A surge in Libyan Oil Production further weighed down the Crude prices.

Many European Governments reinforced virus triggered restrictions after an alarming increase in the coronavirus cases across the globe. The resurgence of the virus dented the global demand for Oil, further pushing the prices down.

However, hopes over a possible deal on the additional stimulus aid by the U.S. capped the fall in prices.

Saudi Arabia’s Crude exports gained momentum in the recent months amid an increase in overseas demand. The Oil exports stood at 5.97 million barrels per day in August’20.

Increased worries over the second wave of the virus might undermine the outlook for crude, further pushing the prices lower.

Base Metals

Base Metals on the LME ended in the green as China’s economy expanded. A weaker U.S. Dollar further supported the prices.

China’s GDP rose about 4.9% from July’20 to September’20 in the second quarter of 2020, which further increased demand for industrial metals.

China’s output of primary Aluminum increased by 7.9% in September’20 and stood at 3.16 million tonnes. Increase in new smelters introduced in China let to a surge in production.

Nickel gained around 1% and 3% on LME and MCX respectively amid growing demand from the stainless steel segment.

Copper

LME Copper ended higher by 0.59% and closed at $6,779.5 per tonne amid a robust expansion in China’s economy, which supported the red metal prices.

However, an alarming increase in the COVID-19 cases and uncertainty over additional coronavirus relief funds by the U.S. might overshadow increased demand from China and weigh down industrial metal prices.