Home Markets Increasing energy usage curbs in China cloud the demand outlook for Oil and base metals whilst a stronger Dollar weighs on Gold

Increasing energy usage curbs in China cloud the demand outlook for Oil and base metals whilst a stronger Dollar weighs on Gold

by Prathamesh Mallya (AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd)
Sep 29, 2021
Increasing energy usage curbs in China cloud the demand outlook for Oil and base metals whilst a stronger Dollar weighs on Gold, Market, KonexioNetwork.com

On Tuesday, Spot Gold ended lower by 0.92 percent closing at $1733.7 per ounce as expectation of a hawkish stance by the US central bank continued pressure the bullion metals.

While the US Federal Reserve kept the monetary policy unchanged in the recent policy meet, projections of an earlier than expected hike in interest rates gave strength to the Dollar and US Treasury yield denting appeal for the non-interest-bearing Gold.

US Federal Reserve officials stated that tightening of the monetary policy depends on the steady expansion in the US labor market. Investors are expected to have a keen eye on the US employment data for September’21 for more cues on the central bank's monetary policy shift.

In September’21, U.S. consumer confidence slipped to a seven month low reflecting the surge in virus infected cases reigniting worries of slowdown in the economy.

Appreciating Dollar and increasing US Treasury yield might continue to weigh Gold in today’s session.

Crude Oil
On Tuesday, WTI Crude slipped about 0.2 percent to close at $75.3 per barrel. In yesterday’s session, Crude Oil eased after a brief rally as bleak demand prospects arising from China amid investors booking profits weighed on the prices. 

Oil remained elevated in the past sessions as increasing supply jitters amid prospects of increasing global demand pushed prices higher. Tighter supply from US and low production by some of the OPEC members kept the global Oil supply chain under pressure.

Increasing power usage limitations in China in an attempt to limit the carbon emission levels hampering the economic activities in turn clouding the outlook for Oil.

Increasing Fuel demand amid low supply from US and some of OPEC members might continue supporting Oil prices.

Officials US Crude inventory data will be due later in the day.

Base Metals
On Tuesday, Industrial metals on the LME ended mixed with Nickel losing the most as a stronger US Dollar and increasing energy usage limitations in China clouded the demand outlook for base metals.

Output curbs on China’s stainless-steel mills have undermined sentiment in the nickel market as it consumes about Two-thirds of the total nickel consumption. While the outlook for Nickel remains positive, curbs on China’s stainless steel production which affects part consumption of nickel kept prices under pressure.

Further pressuring market sentiments were China’s plans to continue with the rare release of the metals from the state reserve in an attempt to ease the high prices.

As per reports from the International Lead and Zinc Study Group (ILZSG), the global zinc market deficit stood at 6,600 tonnes in July 2021, down from a revised deficit of 40,000 tonnes in June 2021 whereas the global Lead market witnessed a deficit of 11,700 tonnes in July 2021 narrowing down from 13,400 tonnes in June’21.

On Tuesday, LME Copper dipped about 1 percent to close at $9269 per tonne as prospects of bleak demand from China outpaced worries of depleting Copper Inventories across exchanges and pushed prices lower.

Bets over recovery in global demand amid increasing shortage worries is expected to levy some support for the Industrial metals. However, increasing appeal for the US Dollar on bets over a hawkish approach by the US FED might weigh on the Dollar priced industrial metals