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Commodities to struggle for direction amid China, virus uncertainties

Overall, the undertone for commodities remains positive but the momentum has halted for want of positive triggers.

January 30, 2021 / 05:27 PM IST

The first month of 2021 is coming to a close and the market uncertainty is high as is evident from mixed trade in equities, commodities and the US dollar.

Among major commodities, gold is set to end with a modest decline, while copper and crude are likely to end higher but off the highs. The US and Chinese equity markets will end unchanged, while the dollar index is set to make modest gains, its first in three months.

In the last few months, riskier assets benefited from strong growth in the Chinese economy, US stimulus expectations and the progress on the vaccine front. With a lack of fresh positive triggers, commodities and equities are losing momentum, while the dollar index has benefitted from safe-haven buying.

Chinese economic data shows continuing growth in the economy, however, the recent rise in virus cases and the restrictions imposed to limit the spread have fueled concerns that demand may be hit. The Chinese government is dissuading people from traveling during the Lunar New Year holidays which can have a bearing on demand.