Month: July 2020

Commodity Update, Thursday, 9th of July, 2020

Commodity prices extended their gains this week, gaining support from stronger demand as economies and industries restarted, offsetting the risk for a second pandemic wave, especially in the US and China, the world’s two largest consumers of commodities.

Crude oil contracts advanced above $40 per barrel this week based on the hopes for a global economic recovery based on the recent improved macroeconomic data around the world, and tight supplies from Saudi Arabia and other OPEC members.

Furthermore, oil prices boosted from the declining US gasoline inventories, a sign for rising fuel consumption during the summer driving season, despite the growing virus infections in the country.

Copper prices continued their uptrend momentum this week, breaking above 2,80 dollars per pound. The price of red metal recovered 40% from its low in March, returning to pre-pandemic levels in response to the improved industrial demand from China and supply disruptions copper mines in Chile.

Looking at the precious metals, we can see that the price of Gold trades above $1.800 per ounce level, hitting its highest level since 2011, while Silver price climbed to $19 level. Both metals gained support from the massive fiscal and monetary stimulus, the zero interest rates, the weaker US dollar, and the fear for the second wave of the pandemic.

Market Brief, Thursday, 9th of July, 2020

US stocks markets rose 1% on Wednesday on improved risk sentiment, while the Nasdaq index hit fresh record highs, supported from a rally in major technology shares such as Amazon and Apple, despite a jump in virus cases across the country.

The Chinese stock markets surged another 1% on Thursday morning, hitting 5-year highs, extending the strong performance so far this week, supported from massive fiscal and monetary stimulus.

Crude oil prices rose 1% on Wednesday on signs of a recovery in gasoline consumption in the United States as fuel demand climbed to the highest level since March, coupled with an increase in refinery utilization.

Gold prices climbed at $1,810 per ounce on Thursday, hitting 9-year highs, due to the weakness in the US dollar and the record spike in COVID-19 cases around the world.

The Chinese yuan rose to 4-month highs against the US dollar, breaking below the key resistance level of 7, gaining support from the recovered Chinese economy after the pandemic and the ongoing rally in the Chinese blue chips stocks.

Gold prices continued their strong uptrend, hitting fresh multi-year highs of $1.800/oz on Wednesday morning, as investors are looking for safety on concerns over record spike of COVID-19 cases around the world which could limit the global economic recovery.

Coronavirus Update:

Global cases: More than 11.79 million

Global deaths: At least 543,595

Top five countries: United States (more than 2.99 million), Brazil (over 1.66 million), India (over 719,000), Russia (over 693,000), Peru (over 309,000)

Analysis for Gold:

Investors fled to the safety of gold, as the COVID-19 pandemic is not showing any sign of slowing down, increasing the worries of a slower than-expected economic recovery after the pandemic.

Furthermore, gold is gaining support from the pledge of the Federal Reserve and other Central Banks to keep their interest rates near zero until 2022 and continue their accommodative monetary policy measures and fiscal packages to limit the economic damage from the pandemic.

The additional liquidity in the system increases the risks for inflation and currency devaluation, benefiting the yellow metal which has been used as a hedge tool in investment portfolios against those risks.

According to the World Health Organisation (WHO), there has been more than 200,000 cases per day in July, almost double the cases from April, due to the rising numbers in Latin America, India and the southern States in the USA.

In Asia, the government of Australia re-imposed lockdown measures in Melbourne for six weeks, the second-biggest city in the country, affecting more than 5 million people.

Meanwhile, more than 3 million cases have been confirmed in the US, along with at least 130,000 deaths according to Johns Hopkins University. Florida, one of the healthiest states has rolled back its re-openings, as virus cases surged while it also faces an impending shortage of intensive care unit beds.