Gold scales higher whilst Oil& Base metalsgain on a supportive demand outlook

Retreating US Treasury yield and mounting inflation levelsmight underpin Gold prices whereas Oil recovered on improving demand prospects.

Gold
Spot gold ended the week on a positive note with gains of over 1.1 percent despite the uptick in the US Treasury yield and a firmer Dollar as the US Federal Reserve maintained its accommodative stance which is supportive for Gold.
Also, US Consumer prices rose in April’21 following strong demand which hinted towards mounting inflation levels further supporting Gold, an inflation hedge.
However, US Federal Reserve officials understated inflation woes earlier in the month by stating that the current prices rally was triggered by the temporary optimism over reopening of economies which kept the prices in check.
Moreover, paced distribution of the vaccine raised bets on a speedy recovery in global economies boosting markets risk appetite which pressured the safe haven, Gold.

Crude Oil
WTI Crude soared over 4 percent in the week gone by as optimism over revival in global economies outpaced worries over plummeting demand from top consumers like India & Japan.
With major economies like US & Europe easing pandemic led restrictions and the massive vaccination programs around the globe bets on recovery in Oil demand strengthened.
Also, the Energy Information Administration (EIA) reported a withdrawal of 1.7 million barrels of US Crude inventories in the earlier week which further supported Oil prices.
Markets also kept a keen watch on the developments over the nuclear deal between US & Iran for cues on entry of Iranian Oil in the global markets.
With the probable resumption in Iranian Oil supply markets focus is expected to shift towards the upcoming OPEC meeting scheduled on 1st June’21 for cues on their production stance in the coming months.

Base Metals

Last week, industrial metals on the LME ended higher with Nickel posting the most gains in the pack. Bleak prospects of further monetary policy tightening by the PBOC and bets on improving global demand in the coming months underpinned Base metals prices.
China’s Industrial firms profits witnessed slow growth in April’21 despite the increase in exports as the strict power consumption norms and high commodity prices hampered the industrial sector.
Weakening of China’s industrial segment alleviated worries over further policy tightening by the People’s Bank of China (PBOC) which supported market sentiments. Also, signs of improvement in the Sino-American relations overshadowed the recent shortcomings in China industrial sector.
While markets cheered on reopening of major economies and the prospects of increase in infrastructural spending by US; stalling demand from China and its rigorous attempts to curb commodity prices might continue to pressure industrial metals.

Copper

LME Copper rose over 3.1 percent following the mounting supply worries from Chile. The negotiations between the workers at BHP’s Escondida & Spence Copper mine took a turn for worse after the Union representing workers rejected the latest offer made by the company and went on strike in this week.
Spence produced 146700 tonnes of Copper in 2020 while the world’s largest Copper deposit, Escondida, production stood at 1.19 million tonnes in the similar time frame.

Mr. Prathamesh Mallya
AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd
31st May 2021