Oil extends its gains while Base metals scale lower following China\u2019s move to limit any increase in commodity prices.
Gold
In yesterday\u2019s trading session, Spot Gold scaled lower by 0.4 percent to close at $1858.7 per ounce. Gold prices continued to trend lower markets expected tightening of the US monetary policy after the recent upswing in the world\u2019s largest economy.
Investors continued to unload Gold as the ongoing US Federal Reserve policy meet (scheduled on 15th & 16th June\u201921) kept investors on their toes. While US FED officials continued to refer to the recent price rallies as a temporary element, markets continued to bet on a hawkish approach. Expectation of a possible cutdown on the expansionary stance strengthened the Dollar.
The yellow metal remained elevated earlier in the month as an accommodative stance by global central bank kept the demand afloat. Bets on a potential rate hike by the US FED dented appeal for the bullion metal.
Crude Oil
On Tuesday, WTI Crude gained about 1.8 percent closing at $72.1 per barrel as forecasts of booming Oil demand in the coming months continued to support investors sentiments.
Depleting US Oil inventories and reopening of major economies following a paced vaccine distribution painted a favorable outlook for the Oil market.
Profits for Oil were capped as markets remained cautious as the ongoing US Federal Reserve policy meet which ends on 16th June\u201921 could suggest a shift in the monetary approach of US in the months ahead.
The International Energy Agency (IEA) appealed to the Organization of the Petroleum Exporting Countries (OPEC) and allies (also referred as the OPEC+), to increase the output in order to meet the soaring demand.
Base Metals
Industrial metals on the LME ended mixed on Monday with Aluminium and Nickel posting the highest gains amongst the pack. Worries over tapering of the expansionary monetary policy by the US central bank coupled with worries over China\u2019s move to curb any commodity prices increase weighed on the entire pack.
Markets expect that the US Federal Reserve might move towards a slightly hawkish stance after witnessing a steady recovery in the US economy and a stronger labour market which hampered the growth assets like industrial metals.
Moreover, Chinese officials announcing to accelerate monitoring and supervision of the commodities markets after China\u2019s PPI soared to a multiyear high further added to the downside for industrial metals. China also plans to sell its state reserves of Copper, Aluminium & Zinc in order to ease the prices.
Investors might also remain cautious ahead of China\u2019s industrial production data for May\u201921 scheduled later this week for cues on demand in the biggest metal consuming economy.
Copper
LME Copper plunged over 4 percent to close at $9569.5 per tonne while Copper on the MCX ended lower by 3.9 percent to close at Rs.716.8 per kg. China\u2019s attempt to restrict any prices increase after the recent commodity price spike remained a considerable headwind for the red metal.
Mr. Prathamesh Mallya
AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd
16th June 2021
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