With global recovery in sight, Crude and Gold register surge in prices

As governments across the world have begun to move towards the lifting of the lockdowns, there is renewed hope amongst investors towards commodities. The US, New Zealand, Europe, and Australia have announced plans to bring their economies back on track, sending positive signs in the global commodities markets.

Gold

On Wednesday, spot Gold prices ended higher by 0.22 percent as the U.S. Federal Reserve kept its interest rates near zero and stated that it will use full range of tools to get the US economy back on track. However, hopes over easing of the lockdowns in many countries amid expectation of a potential treatment drug for COVID-19  boosted the risk appetite amongst investors and dented the appeal for the safe-haven asset Gold. Even some parts of the U.S., New Zealand, Europe and Australia decided to partially ease the coronavirus related lockdown which supported the market sentiments. However, fiscal and monetary measures by the U.S, Japan, Europe and China in order to tackle the implacable virus and the economic damage done by it limited the downfall.

Silver

On Wednesday, spot silver prices ended lower by 1.12 percent to close at $15.4 per ounce whereas prices on the MCX ended lower by 0.15 percent to close at Rs.41,775 per kg.

Crude Oil

Crude oil prices registered a massive surge of over 22 percent on Wednesday to close at $15.1 per barrel. The recovery was due to less than expected rise in the U.S. Crude inventory levels at a time when demand recovery is happening in China and other major economies of the world. As per reports from the Energy Information Administration, the U.S. Crude inventory levels surged by 9 million barrels last week while the markets expected a rise of just 10.6 million barrels. However, fast filling storage capacities at the U.S. delivery points coupled with fragile global demand continued to weigh on Crude Oil prices in the earlier trading sessions. Markets now expect many nations to revoke the lockdown in the coming weeks, as the Coronavirus worries have eased across the world. The U.S., Europe, Australia and New Zealand have already announced a gradual easing of the coronavirus related lockdown.

Base Metals

On Wednesday, base metal prices on the London Metal Exchange (LME) ended positive as hopes over easing of the Coronavirus related lockdown in major economies improved the demand prospects for industrial metals. Moreover, China’s manufacturing activity numbers registered growth for the second consecutive month in April 2020. China is the biggest metal consumer in the world and demand recovery in its economy gives a positive impact on metal prices. Zinc prices on Wednesday also found some support as its treatment charges declined rapidly in the past weeks, signaling towards a near term supply shortage. The pandemic which has hampered the global economic activities led to the supply curbs in the global Zinc market.

Copper

On Wednesday, LME Copper prices ended higher by 0.73 percent as a resumption in factory activity amid an evident shortage in the global supply supported the red metal prices. However, worries over the economic damage due to the pandemic and chances of possible recession weighed on the prices.

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