Commodity Market Wrap- All That You Need to Know

Summary

• Commodity space has been a roller coaster ride with many safe haven commodities such as gold gushing across the global front.
• Many commodities such as iron ore have witnessed a supply disruption in the wake of COVID-19 outbreak and coupled with bad weather conditions across Australia and Brazil and robust steel production across China has observed an impeccable rally until the recent past.
• The workforce challenges emerged in the wake of several restrictions imposed by various governments to contain the spread is now showing results with many commodities such as copper facing supply woes.
• Important highlights from every segment of the commodity front.

Commodity market had witnessed jam-packed actions so far on the precious metal, iron ore, crude oil, and base metals front, offering a see-saw ride to investors.

On the precious metals front, the gold spot rallied over the fear of emerging second wave of COVID-19 infection across China and New Zealand to surpass its previous seven-year high to trade at the highest price since October 2012 at USD 1,789.48 per ounce (intraday high on 1 July 2020).

To Know More, Do Read: Gold Vaults to Highest Levels Since October 2012; Trade Trends and Data Divergence

An impeccable rally in gold prices kept the stocks of ASX-listed gold miners afloat with many such as Ramelius Resources Limited (ASX:RMS) even reaching a record high. While high gold prices have been supporting the stock price of many ASX-listed gold miners, individual announcement, and market prospective over such stocks have also dictated the move of ASX-listed gold stocks.

For example, while a high gold price has provided a general sentiment splash to many ASX-listed gold stocks, many stocks such as RMS have surged over their recent exploration results and updated FY20 and June 2020 quarter production guidance, while some stocks such as Evolution Mining Limited (ASX:EVN) have come under pressure over their reduced FY20 production guidance amidst high gold prices.

To Know More, Do Read: ASX-listed Gold Stocks- Ramelius and Evolution Chart Study Before and After a Price Sensitive Announcement

While the gold space has been the talk of the week, silver did not lag behind with prices rallying 58.60 per cent from USD 11.640 per ounce (intraday low on 18 March 2020) to the recent high of USD 18.462 per ounce (intraday high on 1 July 2020), following the trajectory set forth by gold, to even outperform gold for a while amid high backing from money managers.

To Know More, Do Read: Silver Outperforms Gold with Over 30% Return; Money Managers Betting on Silver!!

The clash of higher return between gold and silver coupled with a sudden spike in gold prices, prompted the gold-to-silver ratio to test its major resistance of 100.0, and the result of tug-of-war between gold and silver to deliver higher return would depend upon the ability of the gold-to-silver ratio to breach and sustain the mark of 100.0 or its inability to do so.

To Know More, Do Read: Gold to Silver Ratio Hits 100, Which of the two Precious Metals to Lead Performance Charts

Iron Ore Market

Iron ore prices came under pressure over the restoring Australian and Brazilian supply chain, which was in troubled waters due to bad weather conditions, leading to a splash in iron ore prices. However, the iron miners geared up the supply while sailing through various challenges to leap with high iron ore prices.

To Know More, Do Read: Iron Ore Futures Predisposed to China’s Steel Industry Revival

The surge in iron ore supply from Australia and Brazil coupled with a slight decline in demand due to environmental bans on several mills across China, hammered the price with iron ore futures on the Dalian Commodity Exchange (or DCE) tumbling from the level of RMB 798.00 per dry metric tonne (intraday high on 8 June 2020) to the level of RMB 730.50 (intraday low on 1 July 2020), which marks a price fall of ~ 8.45 per cent.

The decline in iron ore prices, reduced the market optimism around ASX-listed iron ore stocks, with many retracing back from their recent peak.

To Know More, Do Read: Iron Ore Stocks Losing Charm Over Soaring Supply

Crude Oil Market

Crude oil market has witnessed a steep rally with prices of Brent crude oil futures surging from USD 15.98 per barrel (intraday low on 22 April 2020) to the recent high of USD 43.93 per barrel (as on 23 June 2020), a price gain of ~ 174.90 per cent.

To Know More, Do Read: How is Crude Oil Poised for the Reminder of the year 2020?

The recovery in crude oil prices further supported the share price of some ASX-listed oil and gas stocks, which till the end of June 2020 remained largely in pressure due to the market estimation of weak oil demand across the global front.

To Know More, Do Read: What Are Chartists Pointing Out in ASX-listed Oil & Gas Stocks- WPL, OSH, and STO

Base Metals

Base metal prices have finally started recovering across the global front amid supply woes that emerged over several restrictions imposed by various governments to contain the COVID-19 spread.

The reduced workforce available in the mining industry coupled with issues across the shipping industry created a supply void, especially for copper, leading to a sentiment splash in base metals prices.

For example, copper prices climbed the price ladder swiftly with copper cash surging ~ 31.67 per cent from the level of USD 4,617.5 per tonne (intraday low on 23 March 2020) to the current high of USD 6,080.0 per tonne (as on 2 July 2020) on the London Metal Exchange.

The surge in copper prices further supported the share price of many ASX-listed copper stocks, including Emerald Resources NL (ASX:EMR), Metals X Limited (ASX:MLX), and these stocks have now started to make their way to the top to stand among the top-performing stocks of the year so far along with some gold and iron ore stocks.

To Know More, Do Read: Commodity Stocks Making Their Way To The Top

In a nutshell, commodity market has been a roller coaster ride for investors so far with many commodities such as gold, silver, and iron ore rallying considerably since the beginning of the year until the end of June 2020, and few such as copper, nickel, crude oil which have been delivering a shock worldwide until the mid-March 2020, started recovering.

The surge and decline in various commodity prices have been dictating the direction of many commodity-related stocks, but at the end almost every commodity segment such as energy, precious metals, base metals, ferrous metals, are now back on track and moving in the upside direction with certain risk factors.