Virus Worries Dampen Sentiments

Copper and gold took the brunt of the downward movement in the commodity markets

The commodity markets were weighed down during the fortnight on the back of appreciating American currency following the strong economic data reported by the US.  This bundled with a fresh round of restrictions in various nations blackened the demand outlook for oil and base metals which may further contribute to the downside in prices. In this pressurised environment hovering in the commodity markets, the commodities which managed to shine through gains were aluminium and zinc. MCX Aluminium zoomed by 2.3 per cent whereas MCX Zinc zoomed by 1.45 per cent.

MCX Aluminium gained on the back of supply worries witnessed recently. A new set of energy consumption norms imposed by South China’s Guangxi region – a prime aluminium producing region – discouraged the already disrupted supply chain. These restrictions were similar to the energy consumption norms imposed in the earlier months in the Yunan province. Additionally, recent floods in China’s major industrial regions joined hands with the earlier reason for a potential shortage of aluminium in the global markets which eased pandemic worries and gave a push to the aluminium prices.

MCX Lead and MCX Cotton dipped by 0.17 per cent and 0.71 per cent, respectively. Recently, it was announced that the Multi Commodity Exchange of India Ltd. (MCX) will modify its cotton contract specification as the pink boll-worm’s frequent attack is impacting the quality of cotton available in the market. This will lead to increased delivery on the exchange and benefit the entire value chain. MCX Copper plunged by 3.05 per cent whereas MCX Gold squeezed by 3.47 per cent during the fortnight.

Ongoing labour negotiations in several mines of the major copper producing nation Chile continued to exert further pressure on the already tight global copper market. Going forward, enhancement in market risk appetite reflecting the strong US economic numbers is predicted to create an encouraging environment for copper prices. MCX Gold was under pressure due to infused fears regarding an increase in the opportunity cost of holding non-interest-bearing bullion. MCX Silver descended by 6.55 per cent in line with the fall in gold prices. The highest losing commodity was Brent oil and crude oil prices.

Brent oil price declined by 6.83 per cent and WTI crude was rattled by 7.76 per cent. The oil prices faced pressure on mounting worries over bleak demand from China and the spread of the Delta variant of the corona virus which continued to cause panic among investors. OPEC’s plan to raise output by 4,00,000 barrels per day from August 2021 to December 2021 in between the weak demand prospects could be traced to the creation of surplus of oil supply in the global markets, which further weighed down the oil prices.