Gold recovers whereas Oil continued to trend higher on a promising outlook

Easing US Treasury yield elevated Gold prices whilebets on a solid recovery in global demand continued to underpin Oil prices.

Gold
In yesterday’s trading session, Spot gold prices gained over 0.4 percent to close at $1907.9 per ounce as the US Treasury yield scaled lower reducing the opportunity cost of holding Gold. Gold has been moving in contrast with the US Treasury yield in the past few trading sessions.
The gains for Gold were capped as the Dollar Index, which gauges the strengthen of the US Dollar, rose making Gold less desirable for other currency holders.
Also, the recent recovery in global economy and rising Oil prices shifted investors towards riskier asset classes. However, potential inflation concerns kept the demand for the Gold elevated.
Markets will have a keen watch on the key US economic data scheduled later in the day for cues on the development in the world’s largest economy.

Crude Oil
WTI Crude prices rose over 1.6 percent in yesterday’s trading session closing at $68.8 per barrel as improved demand prospects amid moderate progress in Iran nuclear talks supported market sentiments.
The Organization of the Petroleum Exporting Countries and its allies, OPEC+, agreed to ease the production cuts as planned earlier following the bets on the recovery in Oil demand.
The OPEC group and its allies led by Russia will pump 700,000 barrels per day (bpd) in June’21 and 840,000 bpd in July’21. OPEC plans to add the balance production cuts of 5.8 million barrels by April 2022. The group of Oil producing countries will next meet on 1st July 2021.
Also, prospects of possible return of Iranian Oil in the global markets were clouded as there was no major outcome even after the fifth round of negotiations held in Vienna.

Base Metals
On Wednesday, Base metals on the LME traded lower as a stronger US Dollar and stalling demand from major metal consumer China dragged the prices lower. The premium for the imported metal into China dropped to a multiyear low indicating towards weak demand in the world’s second largest economy which pressured the industrial metals.
Also, China’s official manufacturing Purchasing Managers’ Index (PMI) scaled lower to 51 (in the similar time frame) down from 51.1 reported in April’21 following the spike in raw material prices. However, the Caixin/Markit Manufacturing PMI which primarily focuses on smaller firms rose to 52 in May’21, up from 51.9 reported in April’21.

Copper

LME Copper dipped about 0.1 percent to close at 10147.5 per tonne as weaker demand from China and a stronger Dollar masked the supply threats for Copper and pressured the prices.
Worries over potential shortage arising from major copper producer Chile eased after BHP stated that the operations at Escondida and Spence mine were normal despite of the strike. The 200-member union walked off the job last week after failing to reach agreement with BHP even after weeks of negotiations. The Global miner BHP subsequently called in substitute workers to keep the mine running.
As per Chile’s Copper commission Cochilco, Codelco copper mine’s output stood at 132,700 tonnes in April’21 i.e. a drop in production by 0.5% (yoy) whereas BHP’S Escondida mine production stood at 85,700, a 16.5 percent fall in the similar time frame.

Mr. Prathamesh Mallya
AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd
3rd June 2021