Commodities give mixed signals, as investors play safe on the new of global economic recovery

Investors are avoiding making aggressive bets on Commodities to avoid sharp losses against the backdrop of recovery from the COVID-19 pandemic. While all big nations have laid out recovery plans for their economies, investors are still now sure about the minimum time that is required before industrial activity gets back to normal.

Gold

On Thursday, Spot Gold price ended marginally higher by 0.11 percent to close at $1717.7 per ounce. The US economy reported a dip in the number of unemployment claims last week, leading to expectations that the impact of the COVID-19 pandemic will soon ease. About 5.2 million Americans claimed for unemployment benefits last week which was moderately lower than 6.6 million in the week before. Total reported claims over the past month have surged over 20 million as the economic activities in the U.S. came to a standstill. After a month-long shutdown, President Donald Trump announced new guidelines to reopen the economy which boosted the market sentiments, in turn, denting the demand for the safe-haven asset of Gold. However, global recession worries reflecting the havoc created by the pandemic which has infected  more than 2 million people and killing 136,667 across the world, kept Gold prices in control.

Silver

On Thursday, Spot silver prices ended higher by 0.94 percent to close at $15.6 per ounce whereas prices on the MCX ended higher by 0.51 percent to close at Rs.44,255 per kg.

Crude Oil

On Thursday, Crude Oil prices ended flat closing at $19.9 per barrel as the slowdown in production activities by OPEC+ and U.S. supported the prices. However, the destruction of demand due to lockdowns across the world continue to affect the prices of crude oil, as industrial demand for the fuel has declined significantly. OPEC and its allies have decided to trim their production by 19.5 million barrels per day over a period of time. This move came after Oil prices plunged to its 18 months low in March 2020. Oil prices crashed as the lockdown announced by multiple nations led to a halt in the industrial activities in turn hampering the demand for Oil. Recession worries further clouded the demand outlook for Crude Oil and pushed the prices lower. However, output cuts by OPEC+ group coupled with a slowdown in refinery output in the U.S. due to falling demand limited the downfall.

Base Metals

On Thursday, Base metal prices on the London Metal Exchange (LME) were mixed as worries over possible global recession hampered the demand outlook of industrial metals. Prices found some support over positive economic data from China. However, halt in the industrial activity in the rest of the word signalled towards an evident economic fallout which led to a demand crash for the base metals. The COVID-19 outbreak has stoked global recession fears which dampened the outlook for industrial metals. 

Industrial activities will be slow to resume their operations after the lockdown which might continue to weigh on the base metal prices.

Copper

On Thursday, LME Copper prices ended higher by 0.56 percent to close at $5140 per tonne as positive economic data from China supported the red metal prices. Copper inventory levels on the LME verified warehouse have almost doubled since the beginning of 2020 signaling towards an evident fall in demand for the lead metal.

Author : Mr. Prathamesh Mallya, Chief Analyst, Non Agri Commodities and Currencies, Angel Broking Ltd.