Metals rally and oil prices decline as worries of a second-wave of Covid-19 grip markets
Commodity Online | June 29 2020
UPDATED 17:52:14 IST

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Precious Metals have opened higher and have been trading steady since then with Gold at $1784.30/oz and Silver at $18.168/oz, higher by about one-third of a percent each. CME Gold rallied sharply on Friday as increasing fears of a second wave of Covid-19 saw safe-haven appeal for Gold push prices higher by over $30. Silver prices also rallied over 35 cents following the sharp increase in Gold prices. The relentless spread of the coronavirus curbed optimism for a swift recovery the global economy, sending global equities to a two-week low. Gold is used as a safe investment during times of political and financial uncertainty. Indicative of sentiment, SPDR Gold Trust holdings rose 0.3% to 1,178.90 tons on Friday, while speculators increased their bullish positions in COMEX gold and silver contracts in the week to June 23. Gold ETFs have already seen record inflows this year as the pandemic evolved across the globe. We continue to remain bullish on Gold prices and expect prices to test $1800.0/oz and further higher in the coming few weeks whereas, the sharp rally now pegs our key support zone at $1768.0-$1755.0 in the short term. Silver is also bullish but despite the gains, the lack of a similar buying momentum remains a concern.


WTI Crude Oil opened lower testing at low of $37.52/bbl and is trading at $38.95, up 1.20% while Brent Oil is also higher by a percent at $41.34/bbl currently. Oil prices have collapsed over the past few days as renewed fears of demand erosion continue to force traders to book profits as the number of coronavirus cases increase globally. Despite efforts from OPEC and Russia to keep excess supply off markets, the real worry remains regarding recovering demand which once again may take a hit as lockdowns are re-enforced across countries who are now fighting a second-wave of virus infections. We are neutral on oil prices as traders are likely to watch data points on further development regarding the spread of the virus. Technically, a strong resistance is seen in play at $40.34/bbl whereas on the downside, a break below support at $37.88/bbl should see oil prices test $35.0-$32.0 in the short term.


Base Metals continue to trade steady today with Copper leading the gains at $5974.50/ton, up 0.54% followed by Nickel and Aluminum while Zinc is trading slightly lower in red at $2032.0, down 0.18% currently. The strength in industrial metals was largely driven by recovering Chinese demand which has almost reached pre-lockdown levels but a resurging number of cases across China continue to mount worries from a demand perspective. The focus right now is turning to copper and Chile, the world's largest producer of the red metal, where the coronavirus appears to be still spreading through the production sector. Further suspensions in both mines and smelters have further supported the prices. Copper have rallied over 37% from its lows and the technical picture points towards a potential correction in the short term. We see $5675.0 as the key support for Copper prices breaking which we may see prices enter into a sharp corrective mode in the short term whereas on the upside, resistance is expected at $6000.0 and then higher at $6075.0 this week.


Sam Nair