As we inch closer to the end of 2020, a year which we wish to obliterate, commodities continue to sing an upbeat tune.
Riskier assets like global equity indices along with commodities like base metals and crude oil continue to hit fresh multi-month peaks while even safe havens like gold and silver, which had noted sharp correction last month, seem to be retracting their decline.
The major factors that have lent support to the prices is growing prospect of additional fiscal stimulus from the US along with weakness in the US Dollar Index.
In the US, despite the ongoing negotiations there are signs that the deal for new coronavirus aid may be passed soon. As per latest report from Reuters, US Congressional Republicans and Democrats are scrambling to pass a new round of coronavirus aid with lawmakers from both parties saying that failure to agree was no longer an option. Earlier Senate majority leader, Mitch McConnell, said that it is 'highly likely' negotiators will be working through the weekend to reach an agreement.
The growing expectation of US fiscal stimulus along with Fed's accommodative stance have weighed on US Dollar which in turn has lent support to commodities at large. US Fed earlier this week kept its monetary policy unchanged but maintained that it will continue to support the economy until it sees 'substantial further progress' in employment and inflation. The Dollar Index has also come under pressure amid decline in safe haven demand and worries over US health in face of surging cases in the nation. US Dollar Index hit fresh April 2018 lows of 89.73 on Thursday and is down more than 6.5 percent year-to-date.
Apart from the abovementioned factors, risky assets like base metals and crude oil have also sought support from progress on vaccination front while in case of safe haven gold and silver worsening virus situation and uncertainty related to Brexit have lent support.
On vaccination front, sentiments have surged following reports that Moderna Inc.'s COVID-19 vaccine won backing from a panel of experts who advise US regulators, setting the stage for its shot to be the second vaccine cleared in the US. (Bloomberg) Earlier this month Pfizer-BioNTech vaccine has been rolled out across UK, Canada and US. Meanwhile on virus front, cases continue to surge with global infections topping 74.8 million while deaths exceeding 1.64 million. Also on Brexit front, uncertainty prevails as British Prime Minister Boris Johnson's office said trade talks with the European Union were in a "serious situation" and that no agreement would be reached unless the bloc changed its position substantially. (Reuters)
Overall, even though there are both positive as well as negative factors for risky commodities as well as safe havens; the trend has remained positive with markets seemingly replicating the qualities of mythical sword of Gryffindor – taking in only what makes it stronger.
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