IGI Logo

Below are Views On Spot gold gained over 1.6 percent in the week gone by as mounting inflation worries By Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel One Ltd 

Easing supply worries pressured Base metals 

Gold

Spot gold gained over 1.6 percent in the week gone by as mounting inflation worries, uncertainties arising from China and the power shortage crisis kept the demand for the safe haven Gold elevated.

Increasing bets over the ongoing inflation not being a transitory element has been supportive for Gold as it is widely considered as a hedge against inflation and currency debasement.

Also, a weaker US Dollar underpinned the Dollar denominated Bullion metals.

The gains for Gold were capped on expectations that the US Federal Reserve might begin to taper the expansionary policy as soon as next month.

The outlook for Gold remains clouded in the week ahead following the resumption in markets risk appetite and the US FED moving towards withdrawal of the economic support.

US FED Chair Jerome Powell stated that the ongoing inflation might ease next year which is expected to weigh on Gold.

Crude Oil

WTI Crude gained over about 0.8 percent in the past week as a dip in US Crude inventories coupled with potential shortage concerns helped Oil prices extended the rally.

As per reports from the Energy Information Administration (EIA), US Crude inventories dipped by 431,000 barrels in the week ending on 15th October’21 against the market expectation of a 1.9-million-barrel rise. Moreover, surge in coal and natural gas prices coupled with falling temperature in China is expected to keep the Oil market under supplied and prices elevated in the days ahead.

However, China moving towards easing coal prices and mounting inflation worries erased some of the gains for Crude Oil by the end of the week.

Rising fuel demand given the recovery in economic activities amid tighter Oil supply might continue to support Oil prices in the week ahead.

 A tight supply market amid revival in global demand is expected to keep Oil prices elevated.

Base Metals

Industrial metals on the LME ended mixed with Aluminium and Zinc posting the highest loses amongst the pack. Industrial metals eased after a power rally earlier in the month as China’s attempts to ease the surge in coal prices to support electricity producers during the widespread power crisis eased potential supply threats.

Thermal coal futures prices in China plunged during the week after hovering near record highs easing shortage concerns in global markets and pushing the prices lower. While China’s power consumption norms continue to hamper production activities of Aluminium, Zinc and other industrial metals, easing coal prices took some pressure off the already disrupted supply chain and kept prices under pressure.

Nickel found some support in the week gone by following projections of decline in production activities in the Philippines (the biggest supplier of nickel ore to China) in 2021 due to unfavourable weather conditions.

Investors should remain cautious as slowdown in China’s economy coupled with easing supply constraints given the drop in coal prices might weigh on Base metal’s prices in the week ahead.

Copper

Last week, LME Copper ended plunged over 4.8 percent whereas MCX Copper prices dipped over 4.5 percent reflecting the drop in China’s coal prices which eased potential supply constraints.

China’s move to ease coal prices following the power crisis might continue to pressure industrial metal prices.

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