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Below are Views On Gold extend gains whilst Oil slips By Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd

Gold extend gains whilst Oil slips.

 Slow expansion in the US labour market and China’s economy might continue to support Gold prices in the week ahead whereas Saudi slashing Oil prices for Asia amid a gloomy outlook might weigh on Oil.

Gold

Spot Gold rose about 0.9 percent, hovering above the 1800 mark, in the week gone by reflecting the weakness in the US Dollar. Also, slowdown in China’s economy, mounting geopolitical tension and the recent outbreaks of the new variant of Covid19 virus continued to hamper market sentiments in turn supporting Gold.

The US Central bank announcing to keep the interest rates low and not providing any timeline on withdrawing the economic support in the earlier weeks boosted appeal for the bullion metals.

However, the US FED Chair Jerome Powell stated that there might be some tapering of the bond purchases later this year which limited the gains for Gold.

Any kind of positive data set from US will indicate towards tapering of the monetary policy and weigh on Gold. However, slow growth in China, surge in the virus infected cases & a weaker Dollar might support Gold in the week ahead.

Slow growth in US labour market and slowdown in China might support the safe haven Gold in today’s session.

Crude Oil

Last week, WTI Crude prices rose about 0.12 percent as bets over revival in global fuel demand and a larger than expected withdrawal of US Crude inventories supported market sentiments. As per reports from the Energy Information Administration, US Crude inventories were down by 7.2 million barrels surpassing the market expectation of 2.5 million barrels drop.

The gains for Crude were limited as slow growth in China’s industrial segment in August’21 and widening impact of the pandemic amid OPEC’s plan to increase output raised worries of excess of Crude in the global markets.

Gradual recovery in the U.S. Gulf Coast’s Oil producing capacities post the hurricane and optimism over recovery in Oil demand might continue to support Oil prices in the week ahead. However, slow growth in China and pandemic woes keeps the demand outlook gloomy.

Oil prices might remain under pressure as the world's top exporter Saudi Arabia slashed crude prices for Asia over the weekend, signalling that global markets are well supplied.

Also, mounting pandemic worries and slowdown in China amid OPEC’s plan to boost output might continue to weigh on the market sentiments.

Base Metals

Most industrial metals on the LME ended lower in the week gone by following signs of slowdown in China’s industrial activities. Reports stated that China's Caixin Manufacturing Purchasing Managers Index slid into contraction (below 50) in August’21 as increased covid-19 led restrictions, increasing energy usage limitations and high raw material prices took a hit on China’s industrial sector.

However, China’s official manufacturing Purchasing Manager's Index (PMI) came down to 50.1 in August’21 from 50.4 in July’21, data as per the National Bureau of Statistics. Signs of slowdown in the manufacturing sector of the world’s largest metal consuming economy pressured the base metal prices.

Aluminium prices have gained over 29 percent on LME & MCX in 2021 as environmental curbs imposed in China took a hit at their smelter operating rates raising worries of potential shortage. Data as per the Antaike showed that China has cut more than 2 million tonnes of annual aluminium producing capacity with more to come in the times ahead. Disrupted supply from top producer China might continue to support Aluminium prices in the coming months.

Copper

LME Copper ended lower by 1.5 percent as worries over slowdown in China’s economy and easing supply threats pressured Copper prices.

Worries over slowdown in China’s economy might continue to remain a considerable headwind for the industrial metal’s spectrum. However, a weaker Dollar following the slow expansion in the US labour market is expected to levy some support.

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