Crude oil prices may remain on weaker path while bullions counter can witness some short covering from lower levels.
Gold was flat on Monday, as a towering U.S. dollar put pressure on demand for greenback-priced bullion and pinned it near nine-month lows seen last week. Gold marked a fourth straight weekly loss on Friday, having hit its lowest since late-September a few sessions prior, hurt by the dollar’s ascent and bets for steep interest rate hikes gaining traction after healthy U.S. jobs data. Atlanta Federal Reserve Bank President Raphael Bostic, until recently among the U.S. central bank’s most dovish policymakers, on Friday said he “fully” supports another three quarters of a percentage point interest rate rise at the Fed’s next policy meeting later this month. Benchmark U.S. 10-year Treasury yields steadied near the previous session’s over one-week high, weighing on gold.
Base metals may remain subdued but some short covering at lower levels can be seen later today. Reports suggest that China’s Ministry of Finance is planning to allow local governments to borrow an additional US$220bn through special bonds over the second half of the year to boost infrastructure spending. A demand slowdown in China has been a major concern for metal markets this year as Covid-related lockdowns weighed on demand. A further boost to infrastructure spending should be supportive of base metal demand prospects over the latter part of the year. Chile’s state-owned Codelco, the world’s largest copper producer, will begin construction on a long-delayed $1 billion desalination plant this year to supply its largest operations in northern Chile. Zinc may witness some recovery. In 2022, overall zinc concentrate increment has been less than expected overseas due to issues such as pit closures, labour shortages, extreme weather and declining zinc ingot grades.
Oil prices were unsteady on Monday, with Brent trading higher on supply concerns while West Texas Intermediate (WTI) dipped, as traders balanced supply concerns against worries about a recession or China’s COVID-19 curbs hitting demand. Central banks are raising interest rates to tame inflation, spurring fears that rising borrowing costs could stifle growth, while mass COVID-19 testing in Shanghai this week stoked fears of potential lockdowns that could also hit oil demand. Plans for a large Chinese stimulus package over 2H22 have proved positive not just for oil, but for the broader commodities complex. Net long positions in WTI crude futures at now at their lowest level since March 2020, when demand collapsed amid the initial outbreak of COVID-19.
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