Crude Oil and Metals fall as mixed cues leave investors uncertain

On Tuesday, the investors seemed uncertain as a fall was seen throughout the metals and energy segments. One of the key market vectors was the U.S. congressional proceedings that seemed to reach closer to a $900 billion virus-relief package. However, a stronger dollar and a new wave of COVID-19 cases – followed by a fresh set of curbs, especially across Europe – have left global investors indecisive.
A strengthened dollar made dollar-denominated Gold lose its luster. Gold ended lower by 0.9 percent and closed at $1859.6 per ounce on Tuesday. The widened impact of the pandemic across Europe as well as weak economic data of the U.S., however, supported gold prices and minimized the fall. Another support came from the global economic landscape and financial support being planned by the U.S.
Gold prices have remained elevated in 2020 due to low interest rate and inflation risk since Gold is considered as a hedge against inflation. Though the data from vaccine candidates are now adding to the confidence of the markets, the alarming increase of COVID-19 cases and hopes of additional stimulus might continue to support gold in the near term.
Crude Oil
On Tuesday, WTI Crude closed at $47 per barrel, or 1.51 percent lower, as the fresh wave of cases increased the market apprehensions. A strengthened dollar also kept crude prices under pressure. Stricter movement curbs were seen across several economies in Europe and especially the U.K. Several countries also shut their borders with the U.K. in the wake of a new COVID strain that is believed to be more transmissible. The losses were limited as US policymakers seemed to reach an agreement on the virus relief bill. Furthermore, low U.S. crude stocks and optimism over the improvement of the economic scenario had elevated prices in the previous week. U.S. crude inventories plunged by 3.1 million barrels in the last week, according to the reports from the Energy Information Administration.
The crude oil prices might bear the brunt of rising cases and the series of fresh lockdowns.
Base Metals
At LME, base metal prices ended in the red with climbing coronavirus cases and a stronger dollar. A ray of hope to industrial metals came from the fiscal stimulus by the U.S. as well as the vaccine data.
According to International Aluminium Institute reports, the global aluminium production has increased by 4.1 percent in November 2020 and stood at 5.471 million tones. National Statistics Bureau (NBS) further indicated that Chinese industrial output had grown by 7 percent (YoY) in November 2020. The easing of the pandemic-triggered curbs as well as the recovery in consumer spending had boosted industrial activities in China.

Copper fell by 1.3 percent to close at $7,746.5 per ton. A surging U.S. Dollar and apprehensions around the near-term demand weighed on the red metal. Up till September, the global refined copper market deficit has increased to 155,000 tons according to the International Copper Study Group, up from 72,000 tons in August 2020. The prospects for the red metal stay slightly bleak in the light of increasing cases.

Mr. Prathamesh Mallya
AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd