Bullions and Oil steady; base metals extend gains
Commodity Online | September 01 2020
UPDATED 17:59:33 IST

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Gold futures are trading at $1995.95, up 0.88% whereas Silver futures are up nearly two percent to trade at $29.145 currently. MCX Gold Oct futures are up 0.43% to Rs.51920.0 whereas Silver Dec is at Rs.71735, up 1.84% currently. Precious Metals have remained gained marginally over the past few session but the lack of strong buying remains evident despite dovish statement from FED’s Powell at the Jackson Hole Symposium last week where the central bank acknowledged a sluggish employment market and weaker economic outlook in virus hit areas. The market seems to be taking into fold that the current situation has become the new normal until a vaccine if found and despite the current predicament, forward looking indicators continue to remain optimistic. The short-term outlook (through the year, at least) remains bullish as the market focuses on the US elections and the US-China situation which continues to remain tense. Looking ahead, we see Gold trading into a range $1920.0-$2020.0 with renewed buying to emerge above the higher end of the trading range and possibly aim for new highs in 2020 whereas Silver prices have rallied sharply and are expected to test resistance (at its previous highs) at $29.30 with sustained weekly activity above this level to push prices higher to $32.0-$35.0 over the next few weeks. The domestic picture remains sharply different due to the strengthening USDINR, we maintain an upbeat view with Gold expected to test previous highs and Silver to possibly rally to Rs.80000-Rs.90000.0 in the short term.


Oil prices continue to settle into a broad range of Rs.3120-Rs.3250 with near month futures trading at Rs.3150.0, up 0.16% whereas Natural Gas is higher by nearly two percent to trade at Rs.194.10 currently. Oil prices rallied higher after strong demand figures from China supported prices along with the supply disruption triggered by the hurricanes in the Gulf Mexico, which affected around 84% of the USGC production where around 1.7 million bbl/d remain offline. Despite this the oil market continues to remain well supplied and the lack of demand due to covid-19 continues to weigh on prices forcing futures to remain in a tight range. We continue to maintain a neutral-bearish outlook on prices in the short term and expect further selling to develop once prices break down below key support at Rs.3120.0 whereas on the upside, prices are likely to face a series of strong resistance levels at Rs.3210 and Rs.3250.0. Natural Gas is the center of attention with the sharp gains recorded over the past few weeks during the supply season. The major factors for the rally was triggered by the falling output and recently driven by Hurricane Laura. There are approximately twelve weeks to go in the 2020 injection season in the natural gas market after which the November – March demand season begins which could see another strong leg up in the gas markets. In the near term, we may see prices decline to 180 levels and possibly lower before moving higher in the short term.


Copper is trading slightly higher at Rs.528.0, up 0.13% whereas Nickel is up 1.33% to trade at Rs.1150.80 currently. Lower output from Chilean and other mines and increased demand from China pushed the price of copper higher. Falling inventories over the past months have supported the price of copper. stockpiles of copper in London Metals Exchange warehouses dropped from over 280,000 metric tons in May to below 91,000 tons last week. Declining copper inventories have been supportive of the price as they are a sign that demand is rising while supplies are dwindling. We continue to remain bullish on Base Metals as a whole, especially Nickel and expect Sept futures to test Rs.1180-1200 in the near term whereas Copper should rally further to Rs.540-550 once it breaks above recent highs.


Sam Nair