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

Gold extends gains whilst Oil remains under pressure.

 Lowering bets on early tapering of the asset purchase program and slowdown in China’s economy continued to support Gold prices whereas Saudi slashing Oil prices for Asia amid a gloomy outlook weighed on Oil.

Gold

On Monday, Spot Gold rose about 0.64 percent to close at $1823.1 per ounce. The bullion metal extended gains from the week gone by as a lower US Dollar and expectation of a delay in the tapering of the expansionary policy by the US Federal Reserve.

Also, signs of evident 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, any kind of positive data set from US will indicate towards tapering of the monetary policy and weigh on Gold.

Slow growth in US labour market reduced bets in the early tapering of the asset purchase program which weighed on Dollar in turn supporting Gold prices.

Crude Oil

On Monday, the US markets were closed on account of labor day. Oil prices on the MCX in yesterday’s ended lower by 0.6 percent to close at Rs.5034 per barrel. Crude traded lower as the world's top exporter Saudi Arabia slashed crude prices for Asia over the weekend.

Also, slow growth in China’s economy, widening impact of the pandemic amid OPEC’s plan to increase output raised worries of excess of Crude in the global markets.

However, a weaker US Currency limited the losses for the Dollar priced industrial metals.

Oil prices remained afloat in the earlier week as a larger than expected withdrawal of US Crude stocks raised expectation of increase in fuel demand. 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.

 Mounting pandemic worries, slowdown in China and Saudi’s price cuts might continue to weigh on Oil prices.
 

Base Metals

On Monday, Industrial metals ended mixed with Aluminium gaining the most amongst the pack. Stern environmental curbs imposed in China triggered worries of potential shortage of Aluminium in the global markets which has kept the prices elevated in 2021.

The rest of the industrial metal remained under pressure as signs of evident slowdown in China’s economy weighed on market sentiments. China’s private survey stated that their Service sector slipped into contraction in August’21 as renewed restrictions following the widespread of Covid-19 Delta variant hampered economic activities.

In August’21, Caixin services Purchasing Managers' Index (PMI) came down to 46.7 from 54.9 in July’21, slipping below the 50 level which is believed to separates development from contraction. That, coupled with slowdown in China’s industrial sector further hinted towards slowdown in the largest metal consuming economy.

The private sector survey focuses on the smaller and medium sized firms in China. While China has successfully contained the virus outbreak, an evident slowdown in their economy might continue to remain a considerable headwind for the industrial metal prices.

Copper

On Monday, LME Copper ended higher by 0.2 percent as a lower Dollar levied some support for the red metal prices. However, worries over slowdown in China’s economy and easing supply threats kept a lid on Copper prices.

Worries over slowdown in China’s economy might continue to remain a considerable headwind for the industrial metal’s spectrum. Investors might have a keen eye on the Chinese monthly trade data due later in the day.

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