Fear of new Covid-19 strain brings down metals, oil and gold prices

Oil plummeted the most in seven weeks, with investors fleeing the market as a mutation of Covid-19 discovered in the United Kingdom threatened more lockdowns across Europe. Gold also erased most of its early gains, under pressure from an advancing dollar as fears of a new coronavirus strain roiled markets.
 
Copper and other industrial metals prices, too, sagged as the dollar became stronger: The dollar index was nearly 0.5 per cent to 90.43, rebounding from multi-year lows.
 
Bitcoin — which has an inconsistent relationship with the traditional market — too, dropped as much as 6 per cent on Monday.
 
Brent futures earlier slumped below $50 a barrel, at one stage falling almost 6 per cent. More than 16 million Britons are now required to stay at home after a full lockdown came into force in London and the southeast of England. Several countries, including India, have suspended flights from the UK.
 
That’s feeding concerns that a new wave of movement restrictions could come into effect across the region, curbing a recovery in global consumption.
 
Meanwhile, physical oil prices are cooling as Asian refiners ease purchases after an earlier-than-usual buying spree. Abu Dhabi’s Murban crude was sold last week on the spot market below its official price for the first time since August, while differentials for Russia’s ESPO and Urals have also slumped. The structure of the futures curve weakened Monday, indicating supply concerns.

 
Crude has rallied by almost a third since the end of October on a series of vaccine breakthroughs that boosted expectations for a recovery in energy demand next year. In the short term, however, prices are being buffeted as the fast-spreading virus leads to more stay-at-home orders.
 
“Oil prices are wilting amid fears that the new strain will derail the fuel demand recovery,” said PVM Oil Associates analyst Stephen Brennock. “If anything, it reaffirms that the path toward demand normalisation is anything but smooth.”
 
On the other hand, spot gold swung between gain and loss, and was up 0.04 per cent to $1,881.14 an ounce at 8.21 pm IST, after having earlier hit its highest since November 9 at $1,906.46.
 
“Broadly it is a risk-off sentiment. The forex and equities markets are down. The new variant of the virus has sparked renewed uncertainty in the market and we are seeing a drastic risk aversion,” said Bank of China International analyst Xiao Fu.
 
Benchmark copper on the London Metal Exchange (LME) was down to nearly 1.5 per cent at $7,860 a tonne 8.29 pm IST. Copper had rallied to $8,028 a tonne last week, its highest since 2013, as strong demand in China, government stimulus and the rollout of coronavirus vaccines encouraged speculators to pile into the market.
 
“It’s a classic risk-off move triggered by this mutation of the virus,” said Julius Baer analyst Carsten Menke.
 
Cryptocurrencies, too, were in the red. Bitcoin was last down 5.5 per cent at $22,156 after hitting a record $24,298.04 on Sunday. Smaller coins like ethereum and XRP, which usually trade in tandem with bitcoin, fell 5.9 per cent and 9.2 per cent, respectively.
 
Analysts at JPMorgan said in a note on Friday that recent moves by traditional investors, such as insurance companies, to buy bitcoin had sparked speculative buying. “We find it difficult not to characterise bitcoin as overbought at the moment,” they added.