Below are Views On Weaker U.S. Dollar Dents Gold while extending support to Base Metal and Crude Oil By Mr. Prathamesh Mallya- AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd
A depreciating U.S. Dollar dented the yellow metal prices making Dollar-denominated Gold cheaper for other currency holders. In contrast, it extended support to Crude Oil and Base Metal prices. Crude Oil prices rose because of the reduced U.S. inventory and continued production cuts by OPEC and its allies. Copper ended higher on account of robust demand from China - the world’s largest industrial metals consumer.
Gold ended marginally lower by 0.12% and closed at $1805 per ounce as hopes over the COVID-19 vaccine weighed down the yellow metal. However, a sudden rise in the U.S. unemployment claims capped the decline.
The pandemic continues to hamper the labor market in the world’s largest economy resulting in more people applying for unemployment claims.
Furthermore, a depreciating U.S. Dollar made the Dollar-denominated Gold cheaper for other countries extending support to safe haven, Gold.
The Global Central Banks are expected to keep the interest rates low to help the economy get back on track, which is likely to extend further support to Gold.
Hopes over the COVID-19 vaccine along with Joe Biden’s Transition might continue to weigh down the yellow metal further.
WTI Crude gained over 1.8% and closed at $45.7 per barrel amid depleting U.S. Crude inventory. Furthermore, hopes of the vaccine to combat coronavirus underpinned the prices.
According to the U.S. Energy Information Administration’s report, U.S. Crude stockpiles plunged by 745,000 tonnes.
Hopes over tightened supply by OPEC and its allies in the months to come might extend further support to oil prices. A declining oil market and continued bleak demand prospects might result in OPEC and its allies revoking the planned reduction in production cuts by January’21.
Oil prices were further supported by increased economic activities in the U.S. and Europe in October’20, which uplifted the market sentiments.
A depreciating U.S. Dollar along with hopes over potential COVID-19 vaccine might further support Crude Oil prices.
Base metals on the LME ended mixed amid worries over base metal’s demand in the coming future. The widening impact of coronavirus in various world economies overshadowed the hopes of a potential vaccine and dented the base metal prices.
World Steel Association stated that Global crude steel production in October’20 stood at 162 million tonnes, which was around 7% higher than the last year’s production as the production capacities outside China resumed activities.
Reports from International Lead and Zinc Study Group stated that the global Zinc market stood at 33,100 tonnes in September’20
LME Copper ended higher by 0.10% and closed at $7300 per tonne amid increased demand from China for the red metal. A weaker U.S. Dollar further underpinned the prices.
However, a drastic rise in the coronavirus cases worldwide increased worries over the red metal demand, capping the gains.
Moderna, Pfizer & BioNTech, and AstraZeneca have reported progress in developing a vaccine against the pandemic. The potential hopes of having the COVID-19 vaccine soon might improve the demand for copper in the future.
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