Gold steadywhile Base metals & Oil under pressure on bleak demand prospects

Oil prices dipped following the spike in US fuel stockswhilst China’s move to curb commodity prices undermined the industrial metals.

Gold
On Wednesday, Spot gold ended lower by 0.2 percent to close at $1888.3 per ounce. Gold prices were steady in yesterday’s trading session as markets waited for key economic data scheduled on Thursday.
Markets are expected to have a keen eye on the US Consumer price figures (to be published on Thursday) for cues on inflation in the world’s largest economy.
Rising inflation woes triggered by the steady recovery in the US economy raised possibilities of monetary policy tightening by US Federal Reserve which is expected to boost appeal for the Dollar. The US Federal Reserve will hold a two-day policy meet next week.
Along with the US inflation data, global investors also wait for the outcome of the ECB meet scheduled on the same day.
Gold prices found some support after China’s factory gate prices soared following the high commodity prices which further strengthened inflation worries.

Crude Oil
In yesterday’s trading session, WTI Crude ended marginally lower by 0.1 percent to close at $70 per barrel. A spike in US gasoline stocks undermined Crude Oil prices despite bets on increasing in demand from major economies and plummeting US Oil Inventories.
As per reports from the Energy Information Administration, US fuel inventory surged by 7 million barrels last week while the distillate stocks rose by 4.4 million barrels. Spike in US gasoline inventory clouded the optimism over recovery in demand and kept the prices in check.
The fall in Oil prices was limited as US Crude inventories decreased by 5.2 million barrels last week, recording its 11th Consecutive weekly fall and surpassing the analyst expectation of a 3.3-million-barrel drop.
The losses for Oil were further capped supported after the U.S. secretary of state signaled towards bleak chances of lifting sanctions against Tehran which faded the chances of return of Iranian Crude in the global markets.

Base Metals
On Wednesday, most Industrial metals on the LME remained under pressure after China’s producer’s inflation soared to a multiyear high following the recent spike in commodity prices. In May’21, China’s Producer Price index jumped by 9.0 percent after a 6.8 percent rise in April’21 as commodity prices surged to record high levels which reignited inflation worries. Chinese officials vowed to further strengthen the scrutiny of the commodities markets after witnessing the spike in factory gate prices.
Since May’21, Aluminium inventories in the London Metal Exchange (LME) have plunged about 10 percent. The fall in inventory levels comes soon after China imposed stern energy consumption norms in order tackle the severe pollution problem.
After Inner Magnolia, even the Yunnan province (accounts for about 10 percent of China’s Aluminium output) directed the local metal producers to limit their electricity consumption in order to comply with China’s energy consumption targets for 2021. Limited output from major Aluminium producer China coupled with plummeting LME Aluminium inventories signal towards a tighter Aluminium market which might be supportive for the prices.

Copper
LME Copper prices rose marginally higher by 0.15 percent to close at $9978.5 per tonne as China moving towards curbing commodity prices and increase monitoring the commodities markets hampered sentiments.

Mr. Prathamesh Mallya
AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd
10th June 2021