London November 26, 2021: Commodities from copper to crude and cotton plunged while safe-haven gold rallied as the emergence of a highly mutated Covid-19 strain raised concerns about the outlook for global demand and sent financial markets spiraling.
It is worth mentioning to note that Pakistan will have much needed economic benefit from this fall as Country is net commodity importer from oil to metal and food, it be lead to Pakistan central bank change policy of recent monetary tightening in which central bank abruptly increased policy rate by 1.5%.
Much needed sell-off in commodities. This will help to keep the growth momentum going, and government will be able to recover its budgeted PDL & Sales tax on petroleum products. On external front, the decline in commodities prices will help SBP to keep preserving its hard earned foreign exchange reserves built up.
Says Muzzammil Aslam Spokesperson to the Finance Minister
Industrial metals including zinc and nickel fell more than 3% in London, oil futures tumbled below $73 a barrel and cocoa fell as much as 3.5% as U.S. markets reopened after the Thanksgiving holiday. Sugar, cocoa and coffee also fell in New York. A Bloomberg commodity index had its biggest drop since July.
The emergence of the new fast-spreading coronavirus strain is spurring concerns that fresh outbreaks will derail growth in the world’s leading industrial economies. Scientists say it carries a high number of mutations that could make it more effective at evading existing vaccines, with a World Health Organization panel set to discuss the variant later. Global markets sold off heavily, as traders fled to haven assets. Gold rose as much as 1.5%.
Industrial commodities were hit especially hard. For metals, the new strain creates fresh risks to the outlook for demand, imperiling a recent rebound in prices driven by chronic supply constraints that have led to sharp drawdowns in global inventories. For oil consumption, it represents the biggest threat to the recovery in consumption for several months.
Gold reversed from recent losses as investors across financial markets questioned whether new outbreaks could complicate central banks’ efforts to withdraw ultra-loose monetary policies. On Friday, traders rushed to cut back their bets on rate hikes, while safe-haven currencies rallied.
“Uncertainty about the possible consequences of the new virus variant clearly reminds the markets that this pandemic is not over yet,” Alexander Zumpfe, a senior trader at refiner Heraeus Metals Germany GmbH & Co., said in a note. “The gold price should remain supported in this environment and the topic of tapering should take a back seat for the time being.”
What We Know About the New Virus Variant That’s Rocking Markets
Iron ore futures also plunged more than 6% in Singapore, paring a weekly gain as caution crept back into the market. Aside from the risk posed by the new variant, there are other, ongoing ones in China’s property sector, while local governments have struggled to find good projects to spend their money on.
Benchmark Brent crude shed as much as 8.2%, the most since March. OPEC+ could choose to pause its current planned output hike of 400,000 barrels a day or even cut output, according to UBS Group AG. The group will have to consider internal projections, published before the news of the variant broke, that showed an expected surplus early next year.
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