Increasing demand for riskier assets underpin base metals and Oil prices

Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel One Ltd

Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel One Ltd

-Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel One Ltd

Gold

On Thursday, Spot Gold slipped over 1.4 percent to close at $1742.6 per ounce. While the US Central bank kept the policy unchanged in the recent meet, plans on withdrawing the economic support earlier than expected pressured Spot gold prices.

Federal Reserve Chair Jerome Powell stated that they might hike the interest rate in the coming year if the US economy continues to strengthen. An increase in interest rate will increase the opportunity cost of holding the non-interest-bearing bullion

The fall in Gold was limited as unexpected increase in the number of Americans claiming for unemployment benefits weighed on the US Dollar.

Gold also felt some pressure after worries over the impact of China’s property developer Evergrande’s debt crisis on the global economy eased after the group said it would pay some bond interest due.

While US FED kept the policy unchanged, hints towards a hawkish approach in the months ahead might continue to weigh on Gold prices.

Crude Oil

On Thursday, WTI Crude gained about 1.5 percent to close at $73.3 per barrel as tighter supply worries, depleting US Crude inventories and boost in demand for riskier assets underpinned Crude oil prices.

Revival in markets risk appetite and a weaker US Dollar underpinned Oil prices despite prospects of a hawkish approach by the US Federal Reserve in the months ahead.

As per reports from the Energy Information Administration, US Crude inventories dipped by 3.5 million barrels in the week ending on 17th September’21, surpassing the market expectation of a 3.3-million-barrel drop.

Gradual resumption in the US refining activities after the two hurricanes which the US gulf coast led to the withdrawal in US Crude stocks. US Crude inventories are down to the lowest levels in about 3 years.

Sooner than expected tapering of the expansionary policy by US Central bank might weigh on Oil prices. However, tighter supplies and depleting US Crude stocks is expected to levy some support.

Base Metals

On Thursday, most industrial metals on the LME and MCX ended higher following a weaker US Dollar and easing worries over the Evergrande debt crisis. The Chinese property developer Evergrande Group stated that it would make interest repayments on its domestic-issued bond on the due dates.

The People’s Bank of China infusing more liquidity into the banking system in an attempt to avoid a credit crunch further supported market sentiments.

Also, worries of tighter supply chains and depleting inventories across exchanges amid prospects of increasing global demand underpinned the base metal prices.

However, hawkish comments by US Federal Reserve Chair Jerome Powell at the recent policy meet is expected to cloud the outlook for the entire pack.

As per data from the World Steel Association, Global Steel output dipped over 1.4 percent (yoy) last month as major producer China move to limit production activities in order to curb their emission levels.

Copper

On Thursday, LME Copper ended marginally` lower by 0.13 percent to close at $9273.5 per tonne as easing worries over default by Chinese property developer and boost in liquidity by China’s central bank underpinned Base metal prices.

Easing worries over Evergrande Crisis and worries of potential Shortage in the global markets might support industrial metal prices.

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