Gold steady while Base metals fall in bleak demand prospects from China

Mounting worries of plummeting demand from the major metal consuming nation China kept Oil and industrial metals under pressure in yesterday’s trading session.

Gold
On Monday, Spot gold gained about 0.5 percent to close at $1899 per ounce as the Dollar eased ahead of key US economic data making the bullion metal more attractive for other currency holders.
A low interest rate environment and potential inflation threats has kept Gold prices elevated in the recent months. While President Joe Biden’s $4 trillion spending plan might keep the inflation levels afloat, markets also raised the possibility of a shift in the monetary policy by the US Federal Reserve which kept investors cautious.
The US Federal Reserve have maintained the Interest rates near zero levels so as to help the economy get back on track. However, a hike in the interest rates will increase the opportunity cost of holding the non-yielding gold.
The safe haven asset Gold traded lower in the earlier week as the Dollar strengthened following the steady recovery in US, the world’s largest economy.

Crude Oil
WTI Crude prices eased on the first trading day of the week, ending lower by 0.6 percent to close at $69.2 per barrel. Doubts over recovery in Oil demand and weak trade data from China pressured Crude prices.
China’s Crude imports dipped by 14.6 percent in May’21 (yoy) as maintenance at Chinese refineries amid the stern environmental norms limited the Oil consumption. Low demand from major Oil consuming nation China undermined the market sentiments and pulled the prices lower.
Oil prices rose in the earlier half of yesterday’s trading session following bets on solid demand growth projected by the OPEC. However, investors booked profits after WTI Crude prices touched $70 mark for the first time since October 2018 which dragged the prices lower.

Base Metals
Most Industrial metals remained under pressure on the first trading day of the week as demand woes arising to major metal consuming economy China continued to intensify.
Following the evident weakness in the industrial segment, China’s dismal trade data further hampered sentiments. China’s exports grew at 27.9 percent in May’21 (yoy), well below the anticipated growth rate and down from 32.3 percent growth reported in April’21.
The weaker than expected export data comes inline after the premium for the imported metal into China dropped to a multiyear low indicating towards weak demand China.
Copper
LME Copper prices dipped over 0.5 percent to close at $9900.5 per tonne after China’s Copper purchases slipped lower in last month. As per data from the General Administration of Customs, China’s Copper imports of unwrought copper and copper products stood at 445,725 tonnes in May’21 down from 484,890 tonnes reported in April’21.
The fall in Chinese imports came in after Copper prices surged to record high levels across borders in May 2021 making the red metal less attractive for Chinese buyers.

Mr. Prathamesh Mallya
AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd
8th June 2021