IGI Logo

Below are Views On Commodity Article 25 November 2021 By Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel One Ltd 

Stronger US Dollar pressured Dollar denominated Commodities

Gold

On Wednesday, Spot Gold prices ended marginally lower by 0.07 percent to close at $1788.5 per ounce. Gold prices were pressured as strong US economic figures kept the Dollar elevated.

Fall in the number of Americans applying for unemployment benefits and reports suggesting a GDP growth of 2.1 percent in US in the third quarter further supported the US Dollar.

The Dollar and US treasury yield gained strength earlier in the week on expectations of a sooner than expected rate hike by US Central bank after U.S. President Joe Biden nominated Federal Reserve Chair Jerome Powell for a second four-year term. A stronger Dollar makes the Dollar priced commodities more expensive for other currency holders.

However, the recent spike in the covid19 cases in Europe and worries of slowdown in China’s economy limited the fall in the safe haven asset, Gold.

Easing US Dollar might levy some support for Gold in today’s session; however, bets over hike in interest rates might continue to keep Gold under pressure.

Crude Oil

On Wednesday, WTI Crude ended marginally lower by 0.14 percent to close at $78.4 per barrel. Oil prices remained under pressure as the release of Crude reserves by US and increasing US Crude stocks amid the recent spike in COVID-19 cases in Europe undermined market sentiments.

As per reports from the U.S. Energy Information Administration data, US Crude inventories ended higher by 1 million barrels in the week ending on 19th November’21 against markets expectation of a 1.7 million barrels drop.

The US vowed to release 50 million barrels from the strategic reserve in an attempt to ease Oil prices after the OPEC+ refused to boost output.

Markets wait for the response of OPEC to the release of Crude reserves by major Oil consuming which might keep Oil prices under pressure.

Base Metals

On Wednesday, Industrial metals on the LME and MCX after China vowed to levy support to their property sector which underpinned market sentiments.

Industrial metals remained under pressure earlier in the week as a stronger US Dollar reflecting bets over a sooner than expected rate hike clouded the outlook for the entire pack.

Halt in operations at Glencore’s zinc sulphide operations in Italy and the Tara Mine in Ireland (one of Europe’s largest Zinc reserves) amid disrupted supply from China might continue to support Zinc prices.

Indonesia continued to restrict the exports of Nickel ore despite of the lawsuit filed by European Union at the WTO. Indonesia banned Nickel ore exports since January 2020 in order to support the domestic manufacturers and processing units.

The supply of Nickel was further threatened as the major mining area in Southern Philippines entered the rainy season. Philippines is China’s the prime supplier of Nickel Ore. China’s Nickel ore imports dropped in the recent months following the disruptions in the Philippines. Nickel prices might continue to find some support as many mining regions of Philippines witnessed rains.

Easing US Dollar and China’s moving towards supporting their property sector might support Industrial metals in today’s session.

Low trading volumes are expected following the Thanksgiving holiday in US.

Above views are of the author and not of the website kindly read disclaimer