Precious Metals Preview:
MCX Futures Rebound Above Rs 51K.
COMEX Gold futures saw mixed moves last week. The metal rallied initially on dovish comments from the US Fed. US Federal Reserve Chairman Jerome Powell said the pace of jobs growth in US is rising faster than many people expected, but it may take years before the economy has fully recovered. Powell noted that US economy likely will require more government spending and low interest rates for years. However, the metal eased from one and half week high. Worries over retail demand in India remain in place with daily fresh COVID-19 cases count hitting near 95000. COMEX Gold futures closed just under $1950 per ounce mark. MCX Gold futures edged up in tune with the global cues but slipped after hitting above Rs 51800 per 10 grams and closed around Rs 51300 mark.
Not much of buying has been visible in Gold on rallies over recent weeks as traders have become cautious after the metal failed to hold above $2000 per ounce mark at the start of this month. According to a latest update from the World Gold Council or WGC, Gold-backed ETFs and similar products (gold ETFs) recorded their ninth consecutive month of inflows in August, albeit at their slowest pace for 2020. Collectively, gold ETFs added 39 tonnes (t) during the month, equivalent to US$2.1bn or 0.9% of assets under management (AUM) as the price of gold reached a record high of US$2,067 early in August.
Base Metals Preview:
Copper Sees Bargain Buying At One Week Low.
Copper saw a modest correction last week with COMEX futures sliding under $3 per pound to test one week low as equities slipped. However, the metal moved up as traders eyed a continued fall in LME Copper inventories which are currently placed around a 15 year low. MCX Copper futures also found good support around Rs 517 per kg mark. On the economic front, the unemployment rate in world’s biggest economies eased in July but remains higher than levels before the Covid-19 pandemic, according to the Organisation for Economic Co-operation and Development (OECD). The unemployment rate in the group’s 37 member countries fell to 7.7% in July from 8% in June, the Paris-based organisation said in a report. Both, however, were higher by 2.5 percentage points from February.
Demand Worries Weigh On Crude Oil.
WTI Crude oil futures fell to a three month low near $36 per barrel last week on demand worries and a drop in the US equities. MCX Crude tested lows around Rs 2670 per barrel twice before edging up on bargain buying. The US Energy Information Administration (EIA) noted in its latest Short-Term Energy Outlook (STEO) yesterday that oil market outlook remains subject to heightened levels of uncertainty because mitigation and reopening efforts related to the 2019 novel coronavirus disease (COVID-19) continue to evolve.
Reduced economic activity related to the COVID-19 pandemic has caused changes in energy demand and supply patterns in 2020. EIA expects inventory draws in the fourth quarter of 3.1 million b/d before markets become relatively balanced in 2021, with forecast draws of 0.3 million b/d. Despite expected inventory draws in the coming months, EIA expects high inventory levels and surplus crude oil production capacity will limit upward pressure on oil prices. EIA forecasts monthly Brent spot prices will average $44/b during the fourth quarter of 2020 and rise to an average of $49/b in 2021 as oil markets become more balanced.
Crude oil production in the United States has risen in recent months after declining from 12.7 million b/d in the first quarter of 2020 to a recent low of 10.0 million b/d in May. EIA estimates US crude oil production increased to 10.8 million b/d in August. Production has risen as tight oil operators have brought wells back online in response to rising prices after curtailing production amid low oil prices in the second quarter.
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