Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd
By: Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd
A stronger U.S. Dollar and hopes over potential coronavirus vaccine dented the yellow metal appeal, thereby increasing the appeal for riskier investment assets. However, the same developments extended support to Base Metals and Crude Oil prices. However, the increasing U.S.-China tension affected the market sentiment and capped the gains.
Spot Gold ended marginally higher by 0.08% owing to drag in the stimulus talks by the U.S. The stronger U.S. Dollar and increased hopes over potential coronavirus vaccine drifted the investors away from the safe-haven investment, Gold.
Distribution of COVID-19 vaccine in some nations resulted in investors shifting towards riskier asset classes. However, an alarming increase in the COVID-19 cases across the globe and partial lockdowns in many countries extended support to the yellow metal prices, keeping a lid on the investors’ risk appetite.
Furthermore, the rising tension between China and the U.S. extended support to Gold with the latter planning to impose sanctions on a few Chinese officials.
Approval of Pfizer and Biotech’s vaccine by the U.S. regulators is likely to dent the appeal for the yellow metal.
WTI Crude ended higher by 0.7% amid optimism over the potential COVID-19 vaccines. It improved the outlook for economic recovery, which in turn added to the demand for Crude. Another development that supported the Crude Oil prices was the OPEC-Russia deal to marginally increase production by 500,000 barrels per day from January’21.
However, a sudden spike in the U.S. Crude inventory and the rising tension between the U.S. and China capped the gains. Earlier this month, the Energy Information Administration had reported an increase in the U.S. Crude inventory by 15.2 million barrels against the projection of a 1.4 million barrel drop.
The results for LME base metals were largely positive with Nickel being the highest gainer amongst the group.
While increased demands from China and hopes over the potential COVID-19 vaccine underpinned the demand outlook, a stronger U.S. Dollar and no signs of additional stimulus aid by the U.S. kept the prices in check. Nickel prices surged based on low inventory levels in China and superior demand, primarily from the steel mills.
Zinc prices elevated as Vedanta’s Gramberg Zinc mine remained shut due to a geotechnical failure.
LME Copper ended marginally higher by 0.1% as worries over renewed lockdown and rising tension between U.S. and China dented the demand prospects for Copper and other industrial metals.
Hopes over additional stimulus amid the hopes over potential vaccine might extend support to industrial metal prices. However, a stronger U.S. Dollar and rising tension between the U.S. and China might have an adverse effect.
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