Nissan to lay off thousands of workers as sales drop    Trump picks Susan Wiles as White House chief of staff    Three charged in connection with Liam Payne's death    Israel passes law to deport relatives of attackers, including citizens    Monkey mayhem in South Carolina after 43 primates escape research facility    Russian anti-war teenager faces five years in jail after failed appeal    Uproar in Ghana after president unveils his own statue    BD and INS partner to elevate standards of infusion care in MENAT    Qassim emir launches 52 health projects costing a total of SR456 million    Dubai Design Week launches its 10th edition, celebrating creativity and innovation    Fakeeh Care Group reports 9M-2024 net profit of SR195.3 million, up 49% y-o-y driven by solid revenue growth and robust profitability    GASTAT: Passengers of public transport bus and train soar 176% and 33% respectively in 2023    HRT does not impact life expectancy — UK health body    Liam Payne's body to be flown back to the UK    Arab leaders and heads of state congratulate US President-elect Donald Trump    Neymar suffers muscle tear, out for 4-6 weeks    Suspect arrested for banking fraud totaling SR493 million as Nazaha pursues corruption charges    Al Nassr secures 5-1 victory over Al Ain to edge closer to knockout stage    Al Ahli extends perfect start with 5-1 victory over Al Shorta    Mitrovic's hat-trick leads Al Hilal to 3-0 victory over Esteghlal    India puts blockbuster Pakistani film on hold    The Vikings and the Islamic world    Filipino pilgrim's incredible evolution from an enemy of Islam to its staunch advocate    Muted Eid celebrations for millions of Nigerian Muslims    Exotic Taif Roses Simulation Performed at Taif Rose Festival    Asian shares mixed Tuesday    Weather Forecast for Tuesday    Saudi Tourism Authority Participates in Arabian Travel Market Exhibition in Dubai    Minister of Industry Announces 50 Investment Opportunities Worth over SAR 96 Billion in Machinery, Equipment Sector    HRH Crown Prince Offers Condolences to Crown Prince of Kuwait on Death of Sheikh Fawaz Salman Abdullah Al-Ali Al-Malek Al-Sabah    HRH Crown Prince Congratulates Santiago Peña on Winning Presidential Election in Paraguay    SDAIA Launches 1st Phase of 'Elevate Program' to Train 1,000 Women on Data, AI    41 Saudi Citizens and 171 Others from Brotherly and Friendly Countries Arrive in Saudi Arabia from Sudan    Saudi Arabia Hosts 1st Meeting of Arab Authorities Controlling Medicines    General Directorate of Narcotics Control Foils Attempt to Smuggle over 5 Million Amphetamine Pills    NAVI Javelins Crowned as Champions of Women's Counter-Strike: Global Offensive (CS:GO) Competitions    Saudi Karate Team Wins Four Medals in World Youth League Championship    Third Edition of FIFA Forward Program Kicks off in Riyadh    Evacuated from Sudan, 187 Nationals from Several Countries Arrive in Jeddah    SPA Documents Thajjud Prayer at Prophet's Mosque in Madinah    SFDA Recommends to Test Blood Sugar at Home Two or Three Hours after Meals    SFDA Offers Various Recommendations for Safe Food Frying    SFDA Provides Five Tips for Using Home Blood Pressure Monitor    SFDA: Instant Soup Contains Large Amounts of Salt    Mawani: New shipping service to connect Jubail Commercial Port to 11 global ports    Custodian of the Two Holy Mosques Delivers Speech to Pilgrims, Citizens, Residents and Muslims around the World    Sheikh Al-Issa in Arafah's Sermon: Allaah Blessed You by Making It Easy for You to Carry out This Obligation. Thus, Ensure Following the Guidance of Your Prophet    Custodian of the Two Holy Mosques addresses citizens and all Muslims on the occasion of the Holy month of Ramadan    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



WCU: Metals-led commodity rally on US dollar slump
Published in The Saudi Gazette on 08 - 11 - 2020

DUBAI — Since the US election this Tuesday, nearly all assets including most commodities have enjoyed a strong surge. The everything up and US dollar down narrative unfolded despite the prospect of at least two years of political gridlock in Washington preventing US fiscal stimulus from flowing into a COVID-19 hit economy, while also putting the brakes on the reflation trade.
Commodities nevertheless rallied hard as it became increasingly apparent that Joe Biden was heading to the White House despite Trump's unfounded claims about foul play. While equities surged higher in response to collapsing volatility, it was the weaker dollar that gave precious and industrial metals as well as other commodities a boost. Following the election, the Bloomberg Commodity Index has risen by 1.4% with strong gains seen in silver, platinum, gold and copper.
The agriculture sector led by soybeans, coffee and corn traded higher, thereby adding to the prospect of rising food costs. Chicago soybeans reached a four-year high with local prices in China hitting record levels on supply shortages. Dry weather conditions in key production regions from the Black Sea area to South America and the US Midwest together with strong demand from China and now the weaker dollar have all helped drive prices of key crops higher in recent weeks.
The UN FAO published its monthly Global Food Price index for October and it showed a continuation of the upward trend. While showing a year-on-year rise of 6%, the month-on-month 3.1% increase was driven by much firmer prices of sugar, dairy, cereals and vegetable oils with only meat prices showing a small drop.
Precious and industrial metals jumped as the dollar slumped to a two-and-a-half year low with gold breaking above previous resistance at $1930/oz and together with copper recording the biggest weekly gain since July. Silver, meanwhile, was the star performer with the price rallying close to 6% since Tuesday.
With the gold-silver ratio breaking lower at the same time, silver could potentially be in for a period of outperformance with the ratio potentially heading back towards 70 (ounces of silver to one ounce of gold).
Combined with the weaker dollar, bond yields also softened as the risk of reflation faded with the divided US government. While the Fed kept its stimulus steady at its meeting this past week, they also said that more fiscal and monetary support may be needed.
The market is now speculating that with Biden unable to spend money given resistance from a Republican controlled Senate, the Fed may have to step up and fill the gap soon. Hence the strong rally in precious metals, but also the stock market where TINA (There Is No Alternative) has been given renewed focus.
Gold may now take aim at our end of year target at $2,000/oz, but in order to do so the metal needs to stay above the $1,920 to $1,930 area of support.
Energy: After hitting a five-month low at the beginning of the week on COVID-19 worries and rising production from Libya, crude oil made an abrupt turnaround in response to a big drop in US crude oil stocks together with increased speculation that OPEC+ will step in to support the price.
The rally, however, began to deflate once the attention turned from the US election and back to the coronavirus pandemic, with record high case counts being recorded in both Europe and the US.
Overall, Brent crude remains stuck in a wide downtrend, currently with resistance at $42/b and support at $35.50/b. As we have said before, the only proper cure for crude oil at these relatively low levels are the removal of the virus threat through the discovery of a vaccine that can be rolled out globally.
Only then can and will the market start to ponder how much the lack of investment in new discoveries will help boost the price over the coming years. For now, global demand remains challenged and by how much we should find out next week when monthly oil market reports will be published by the EIA on Tuesday, OPEC on Wednesday and the IEA on Thursday.
— The writer is head of commodity strategy Saxo Bank


Clic here to read the story from its source.