Commodities Weekly

 

Activity Briefings…

Gold Comex August future ended with a marginal gain of 0.7% at $1801.9 last week after hitting an 8½-Year high of $1829.8/oz on July 08. US 10-year bond yield continued to hover near multi-decade low and settled at 0.64 last week. Dollar Index prolonged its dumping phase, ended with a loss at 96.614 while, Dow Jones managed a marginal positive close at 25977 last week. Among Base metals, Copper remains star performer, continues its galloping jump, on the verge of notching $3 mark soon. In Energy, both WTI and Brent oil have narrowed their price activity around $40.5(WTI) and $43(Brent) for the past couple of weeks. 

In Domestic bourses, Gold Mcx August shined to another record high of Rs49348 per 10 grams before settling the week at Rs48863. Silver Mcx September jumped above Rs52, 000, the level not seen since September 2013, before marking a weekly close at Rs51362 a kg. WTI Crude oil Mcx July caught in a tight band, settled at Rs3043/bbl, and have been facing a strong hurdle near Rs3100-Rs3155 since early June of this year.        

 

Since the past couple of weeks, both, Safe haven and riskier assets are moving in one direction, all the way up, though a bit of the consolidation or profit taking had seen in between but trends were tilted on the bullish side.

 

What’s driving the market now?

Gold remains investment hotspot, as safe-haven demand and dovish central bank stance have stoked massive fund buying. Investment in GOLD ETF surged to a record high of 3244.12MT while Silver backed ETF holdings also witnessed a new record high of 808.589 million ounces last week. Highly stimulative monetary policies by the world’s key central banks to prevent stress in the economy from coronavirus pandemic, low global bond yields, and safe-haven demand in the troublesome period are the biggest driving factors in popping up gold’s price so far this year.             

 

The Crude Oil market has been facing a mixed set of fundaments, resulting in consolation near $40/bbl after showing decent recovery earlier. 

Bearish factors are benign energy demand after major damage done by the coronavirus pandemic, large global oil surplus, and high crude oil and its products stocks in the United States. 

Bullish factors or factors that have supported the global energy market in recent weeks are the OPEC plus production cut by 9.6mbpd for May-July, dropping the US and global oil production, dropping global oil rigs that have fallen to a 21-Year low, steep drop in the Cartel OPEC crude output to a 29-Year low of 22.62mb/d. The IEA raised its global 2020 crude demand estimate to 92.1 million bpd, up +400,000 bpd from a prior estimate.

 

EIA Weekly Inventory Status Report showed that U.S. crude oil inventories were +17.9% above the seasonal 5-year average in the week ended July 03, 2019, gasoline inventories were +8.4% above the 5-year average, and distillate inventories were +28.1% above the 5-year average. The report also showed that U.S. crude oil production was unchanged at 11.0 million bpd (WoW), down by 2.1 million bpd or 16.0% from its record-high of 13.1 million bpd touched in February this year. Baker Hughes reported that active U.S. oil rigs in the week ended July 3 fell by -3 rigs to an 11-year low of 185 rigs.

 

Recent drivers are Coronavirus cases and its Vaccines Trials. Last week, the IEA warned that the demand recovery is at risk from a resurgence of the pandemic in major economies, which led to softness in the prices. But prices recovered on Friday when Gilead Sciences announced that its Remdesivir drug to treat the coronavirus showed a 62% cut in mortality risk for patients taking the drug.

 

 

By Tarun Satsangi,

www.tarunsatsangi.com