Base metal prices ended marginally lower on Thursday as mixed macroeconomic data and corporate reports turned investors cautious, while a soft dollar provided support.
News of good economic growth in China added a bullish tone to the complex. China’s GDP grew 8.9 percent in the third quarter, the highest since the start of this year.
The country's economic growth has recovered steadily in the past three quarters - GDP grew 6.1 percent in the first quarter and 7.9 percent for the second quarter.
But copper prices came under check after previous day’s explosive across-the-board advances as the dollar gained in early trade and rose above from its yesterday’s 14-month lows.
The red metal’s rise was also kept under check by another warehouse inventory rise by 1,525 tonnes yesterday. The dollar traded strong during the major part of the day but retreated after a rise in US equities.
On the macroeconomic front, the Dollar Index pared gains and ended in the red as the US equity markets reversed its earlier losses on Thursday.
During early trade, the dollar gained broadly and rebounded from 14-month lows. Gains during the first half of the session were on the back of risk aversion that led to a fall in global equities. However, equity markets rebounded and put pressure on the dollar again.
The US leading economic indicators index climbed for a sixth straight month in September while the US jobless situation deteriorated slightly and US home prices unexpectedly fell.
Copper prices could rise in the near-term as the following factors could fuel the upside – 1) today’s Chinese economic data should support base metal prices, 2) the outlook for base metals is staring to improve significantly as market balances finally start to tighten and 3) supply disruption at Chilean copper mines will continue to provide support.
China’s economy expanded at the fastest pace in a year as stimulus spending and record lending growth helped the nation lead the world out of recession.
Chinese economy surged 8.9% in the third quarter and retail sales and other indicators were robust in September. China’s economic growth has shown steady recovery in the past three quarters, as the GDP grew by 6.1 percent in the first quarter and 7.9 percent for the second quarter.
Though the data has come in below market expectations, we feel that it could have a positive impact on base metal prices. The Chinese government said that it will maintain stimulus measures.
On the macroeconomic front, the Fed Chairman Ben Bernanke is expected to deliver his speech. If the speech indicates a faster recovery in the coming months, then risk appetite in the financial markets could rise and put pressure on the dollar today. A weaker dollar will in turn provide upside support to base metal prices.
Copper
Copper prices are sideways with immediate support for MCX November contract seen at Rs.306.10. Further below, crucial support is seen at 304.30 levels.
Whereas resistance is seen at Rs.310.95 levels & further upwards at Rs. 313.75 levels.
Zinc
Zinc prices are sideways with immediate support seen at Rs.101.50 levels for MCX October contract whereas crucial support is seen at Rs.99.80 level. Short-term resistance is seen at Rs.104.80 whereas major resistance is seen at Rs 106.40 levels.
Courtesy: Angel Commodities Get Trading Tips on Agri Commodities
