Home Markets Weak Dollar And New Corona Relief Bill Hopes Support Gold, Base Metals And Crude Oil Prices

Weak Dollar And New Corona Relief Bill Hopes Support Gold, Base Metals And Crude Oil Prices

by Prathamesh Mallya (AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd.)
Oct 15, 2020

Increased hopes amongst investors regarding the new coronavirus relief bill extended support to Gold, Base Metals and Crude Oil prices while easing Dollar. China’s increased industrial activities further supported the Base Metal and Crude Oil prices.

Gold

Gold gained over 0.5% and closed at $1900.9 per ounce amid depreciating dollar. Increased worries over global economic recovery further elevated appeal for the safe haven, gold.

Gains in Gold were attributed to multiple reasons including political uncertainty in the U.S. and revived it as the dollar eased. U.S. House Speaker Nancy Pelosi hoped for a possible agreement over the new coronavirus relief bill which further underpinned the yellow metal’s prices.

The gains in Gold prices were, however, limited as China’s economy gained momentum in September’20. China’s increased industrial activity reflected an improvement in the overseas demand and a balanced recovery. This boosted the risk appetite amongst investors.

International Monetary Fund expressed worries over the outlook for many emerging markets as the virus continued to spread at an alarming rate, thereby limiting the losses for safe haven, Gold.

Uncertainties over additional corona relief fund by the U.S. underpinned Dollar which might weigh down the Gold prices.

Crude Oil

WTI Crude went up by 2% and closed at $41.0 per barrel as U.S. equities rose and Dollar declined. However, worries over the revival in demand for the Crude Oil undermined the outlook.

China’s Crude imports went up by 17.5% and stood at 11.8 million in September’20 as some of the cargoes finally cleared custom. The growing demand from China, the world’s top oil consumer also levied further support to Crude Oil prices.

Resurgence in the coronavirus cases in some of the world’s largest economies and worries over the reinforcement of the lockdown, however, capped the gains.

OPEC too projected a weaker recovery in Oil demand due to disruption caused by the pandemic. Moreover, reports suggest a decline in U.S. Crude inventory levels which might support the prices.

Base Metals

Base Metals on the LME ended higher amid hopes over new coronavirus relief fund. A weaker Dollar further extended support to the industrial metal prices.

China’s exports rose by 9.9% as more economies resumed activities post the pandemic-triggered lockdown.

China’s imports, on the other hand, rose by 13.2% during the same timeframe, projecting a balanced growth in the world’s biggest metal consuming nation’s economy.

The European Union imposed the tariffs ranging from 30.4% to 48.0% on imports of Aluminium extrusions from China. The tariffs were imposed after suspecting Chinese producers charging unfairly low prices. 

Copper

LME Copper prices ended higher by 0.36% and closed at $6,716 per tonne as U.S. Dollar declined. Worries over supply disruption in Chile supported the red metal prices.

Robust demand from China and labour negotiations at major Chilean mines might extend support to red metal prices. However, worries over the global economy will keep the prices in check.