Quantcast
Other Stories

More downside could be seen in base metals in the near future. Base metals are likely to slide further by 5-10 percent because of lack of physical buying and investors are de-stocking their stocks. A higher inventorie..

25 Sep 2011

By Shyamal Mehta
AHMEDABAD (Commodity Online): Base metal was the main discussion this weekend among the investors as its prices plummeted by more than ten percent in last week as traders liquidated their positions because of downgraded global economic outlook by Fed and IMF.

Bears took charge and heavy selling was seen in industrial metals last week due to supply pressure and reduced global demand. LME 3 Month Copper, Lead Nickel fell by approximately 17 percent last week and made twelve months low. LME 3 Month Zinc went down by more than ten percent while Aluminum was trading down by more than seven percent last week.

LME 3 Month Copper last traded at USD 7261 a tonne. While 3 Months Lead and Nickel on LME last traded at USD 2023 per tonne and USD 18050 per tonne respectively. At LME, 3 Month Aluminium last traded near 2205 USD a tonne. Zinc 3 Month LME contract last traded around 1956 USD per tonne.

USD became strong against basket of currencies which triggered further sell off in industrial metals as stronger USD makes a Dollar denominated commodities more expensive for other currency holders. USD index went up to 78.5 from 76.6 in the previous week up by approximately 2.5 percent.

Heavy sell off could be seen in world equity markets last week which was also a bearish signal for the metal complex where Dow Jones Industrial Average Index declined by approximately 6.5 percent. Asian and European indices also declined simultaneously. Among Asian markets, Shanghai Stock Exchange Composite Index went down by two percent; Heng Seng fell by more than nine percent while Nikkei declined by approximately 3.5 percent.

Weak economic indicators from US and Europe released last week also put pressure on metal prices.

More downside could be seen in base metals in the near future. Base metals are likely to slide further by 5-10 percent because of lack of physical buying and investors are de-stocking their stocks. A higher inventories level at LME, the benchmark metal exchange and other exchanges in the world is also a bearish signal for the metals.

Moreover, if situation worsens in Europe and U.S. may also lead to further sell off in metals. Any rise in base metal prices would be a good selling opportunity for positional traders.


Copper prices are likely to fall and may test levels below 7000 USD mark. Lead prices also likely to correct further and may touch 1900-1800 levels in short term. Nickel also looks bearish in the near future and may test 17000-16500 USD levels.


In the near future, metal complex may find its direction from macro economic factors and currency movements.

The author is a senior manager – research with commodityonline.com and may be contacted at shyamal@commodityonline.com


YOUR RESPONSE
Click on the image to reload it
Click to reload image
COMMENTS (0)

@2013 COMMODITYONLINE ALL RIGHTS RESERVED