Gold prices fall as optimism over potential virus treatments increases

July 2, 2020 6:23 PM

On Wednesday, Spot Gold prices ended lower by 0.60 per cent to close at $1770 per ounce as positive trade and economic data generated by the U.S coupled with reduced lockdown measures around the world dented the appeal for the safe-haven asset, gold.

gold, gold prices, Gold prices fall, Spot Gold prices , optimism over potential virus treatments increases, Crude Oil, copperPragmatic stimulus plans unfurled by major central banks, coupled with interest rates hovering near zero, helped in making gold an attractive investment option.

The main concern of governments around the world remained set on how to balance the reopening of the economy with the ramping up of healthcare facilities and testing. Countries remained concerned over a second and more potent wave of the coronavirus. The ongoing war of words between the US President Donald Trump and Chinese authorities is also a matter of concern for investors.

Gold

On Wednesday, Spot Gold prices ended lower by 0.60 per cent to close at $1770 per ounce as positive trade and economic data generated by the U.S coupled with reduced lockdown measures around the world dented the appeal for the safe-haven asset, gold.

As per the Institute for Supply Management (ISM), U.S. industrial activities surged to 52.6 in June’20 from 43.1 in May’20. Many businesses have reopened, and unemployment woes are slowly decreasing.

German biotech firm BioNTech and U.S. pharmaceutical giant Pfizer have started human clinical trials of a potential vaccine, and this has shown a lot of promise.

However, coronavirus cases started to increase rapidly in parts of China and India and limited this downfall in the yellow metal prices. Pragmatic stimulus plans unfurled by major central banks, coupled with interest rates hovering near zero, helped in making gold an attractive investment option.

Crude Oil

On Wednesday, WTI Crude prices ended lower by 1.40 per cent closing at $39.8 per barrel as the resurgent wave of the coronavirus, coupled with strict restrictions on air traffic in many regions of the globe, weighed on market sentiments.

There was a dip in U.S Crude Inventory levels with stocks plunging over 7.2 million barrels in the week ending on 26th June’20. There was also an increase in U.S factory production and manufacturing activities.

Base Metals

On Wednesday, most base metal prices on the London Metal Exchange (LME) ended higher amid positive economic data being generated by the largest metal consumer in the world, China. This pointed toward strengthening demand and led to the appreciation in prices.

As per data from the International Nickel Study Group (INSG), the global nickel market surplus decreased to 8,800 tonnes in April’20 from a revised figure of 10,900 tonnes in March’20.

Moreover, dwindling industrial metals inventories on the Shanghai Exchange, coupled with an increase in metal prices were strong signs of revival from China.

Copper

On Wednesday, LME Copper ended higher by 0.76 per cent to close at $6061 per tonne as mine shutdowns in Chile resulted in severe supply distress across the globe. The increase in red metal prices was also supported by upbeat economic data being generated by the U.S and China.

It has to be seen if human clinical trials for a potential coronavirus vaccine turn out to be fruitful and accepted. Meanwhile, governments have to focus on removing the worries of their citizens, which range from starvation to unemployment.

(By Prathamesh Mallya, AVP – Research Non-Agri Commodities and Currencies, Angel Broking Ltd)

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