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Below are Views On Commodity Article 22 December 2021 By Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel One Ltd 

Revival in markets risk appetite supports Oil & Base metals

Gold

On Tuesday, Spot Gold ended marginally lower by 0.05 percent to close at $1788.4 per ounce. Gold continued to scale lower as revival in the US Dollar and improving risk appetite amongst investors hampered the appeal for the Dollar priced Gold.

Uncertainties around the globe and mounting inflation concerns tends to support Gold. However, hawkish approach by the US Central bank in the months ahead has pressured the bullion metal prices.

The US Federal Reserve stated that they would increase the speed of tapering the expansionary policy in the months ahead and scheduled three interest rate hikes by the end of 2022 following the progress in the US economy and increasing inflation levels.

Higher interest rates are supportive for the bond yields which added to the downside in the non-interest-bearing Gold.

The losses for Gold were limited as widening impact of the pandemic and worries over renewed limitations in major economies underpinned the safe haven asset.

Worries over impact of the new Omicron virus on the global economic growth is expected to boost demand for the safe haven, Gold. However, US FED moving towards increasing interest rates might remain a headwind for the bullion metal.

Crude Oil

On Tuesday, WTI Crude prices climbed higher by 4.24 percent to close at $72.4 per barrel. Oil prices recovered from the huge fall in the beginning of the week following the revival in markets risk appetite. However, mounting worries over the impact of the Omicron virus kept the gains for Crude in check.

Oil prices plummeted on Monday as surge in the Omicron coronavirus cases in Europe & US ignited worries of stricter lockdown which undermined the demand outlook for Crude.

Oil prices traded lower last week after the World Health Organization (WHO) stated that the COVID-19 vaccines might be less effective against the new Omicron variant. That was in line with the US International Energy Agency (IEA) comments stating that the global Oil demand might take a hit following the surge in Omicron cases.

A softer US Dollar, China’s attempts to support their economy and strengthening markets risk appetite might continue to support Oil prices. However, uncertainties over the impact of the Omicron virus might keep Oil prices under pressure.

Official US Crude inventory data due later in the day.

Base Metals

On Tuesday, most Industrial metals on the LME traded higher in line with the revival in global equities and Oil prices following the boost in markets risk appetite. However, a stronger US Dollar limited the gains for the Dollar priced Industrial metals.

Also, expectation of increase in infrastructure investment by China in the times ahead and the PBOC infusing funds in the financial markets in order to support their economy.

Rapidly spreading Omicron coronavirus in US, Europe & Asia cases pressured market sentiment earlier in the week. Worries over renewed limitations following the surge in virus infected cases clouded the outlook for the entire pack.

Widening impact of the new Covid19 variant might hamper sentiments and weigh on the Base metal prices. However, Chinese officials moving towards supporting their economy, a lower Dollar and improving risk appetite amongst investors is expected to levy some support.

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