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Gold, Crude and Base Metals likely to be supported by Stimulus Hopes

By Mr. Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies, Angel Broking Ltd for Prittle Prattle News

Gold ended lower amid the U.S. Federal Reserve policy outcome, while crude also closed in the red despite increased production cuts from Saudi Arabia. The rising COVID-19 cases and renewed economic curbs pressured the crude prices. Base metals projected a mixed trend with zinc being a significant decliner. China reported its peak industrial metal demand. No room for further expansion made investors cautious and further pressurized the industrial metal prices.


Spot Gold ended lower by 0.25% and closed at $1,850 per ounce amid the U.S. Federal Reserve policy outcome. 

The additional stimulus package, which investors waited for a long time, might lead to inflation. This might keep the yellow metal demand elevated, as it is considered a hedge against inflation and currency debasement.

Furthermore, strict lockdowns in major economies like the UK, Germany, France, and China due to the virus resurgence capped the losses for gold.

However, a continuous increase in the COVID-19 cases, hopes over additional stimulus aid by the U.S., and weaker economic data from the U.S. might extend some support to gold prices.

Crude Oil

WTI Crude ended marginally lower by 0.04% amid an alarming increase in coronavirus cases. The rising number of cases led to renewed curbs in major economies that undermined crude oil’s outlook. Term demand concerns for crude oil despite lower U.S. Dollar and hopes over additional stimulus aid further pressurized the oil prices.

However, the losses were limited as the world’s major oil producer, Saudi Arabia announced production cuts of over one million BPD to keep production steady amid the pandemic-triggered restrictions. This might extend some support to oil prices.

Term demand concerns amid the virus outbreak might continue to weigh down Crude prices further. In contrast, declining U.S. Crude inventories might limit the fall.

Base Metals

Base metals ended mixed with zinc being a significant loser within the pack. A lower U.S. Dollar and additional stimulus aid by the U.S. failed to limit losses in base metals.

Reports regarding demand from China peaked, thereby leaving no room for further expansion. It created apprehensions amongst investors and further dented industrial metal prices. Also, a resurgence of the pandemic in China further affected the demand outlook for base metals.

Zinc traded lower, reflecting rising inventories in the LME monitored warehouse and the Shanghai Futures Exchange. 

According to reports from the World Steel Association, the demand for Global Crude Steel went up by 5.8% in December’20 while China’s steel production surged by 7.7%.


LME Copper ended higher by 0.5% at $8,008.5 per tonne as China reported a fall in the number of infected cases. However, a lower U.S. Dollar underpinned the red metal’s demand.

Hopes over additional stimulus aid from the world’s biggest economy amid lower U.S. Dollar might extend some support to industrial metal prices.

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