Precious Metals rallies to record highs today morning with Gold futures testing $1887.80 and Silver prices touching its highest level in over four years at $23.642 with both metals correcting since then to trade at $1881.05, up 0.85% and Silver at $23.04, down 0.42%. Silver futures led the way again rallying 7% in early trade yesterday pushing other commodities higher along with it. Silver is now 12.0% higher over two days, and around 90% higher than its mid-March sell-off lows. While there is little to make a case for the stunning rally in Silver, low liquidity and short covering probably caused the sharp up move in prices. Much of what’s driving silver also is driving gold — aggressive monetary policy financing of fiscal spending, which limits the ability of bond yields to rise. That is sending inflation-adjusted, or real, yields lower, which tends to boost precious metals. The momentum firmly remains inclined to the upside for precious metals and barring the short corrective profit booking moves, we expect Gold to test $1900 and Silver to push above $25 in the near term.
Base Metals opened higher and are trading steady today following the rout in precious metals. LME Copper futures are up 0.77% to $6526.0/ton whereas Nickel is at $13512.0, up over three percent today. The rest of the metals are also lower by around a percent on average. Copper prices are rallying supported by the massive economic stimulus plan in Europe and ongoing worries of supply disruption. Reports indicate that output rates have fallen sharply in Copper producing countries with production now at levels last seen in 2017 during a protracted strike at Escondida, which by itself is responsible for nearly 5% of worldwide production. Increasing demand from China where customs data released last week showed China’s unwrought copper imports (anodes and cathodes) in June rose a stunning 50% from the previous month to 656,483 tons – a full 15% above the previous monthly record. Another key bullish factor for Copper has been the Large-scale speculators like hedge funds have built long positions (bets that copper will trade at a higher level in the future) to pre-pandemic levels and at the same time cut shorts (bets that copper can be bought back at a lower price in the future). Net Long positions were at 41309 contracts, up 30% from the previous week and its highest since June 2018. Despite all the positive, we continue to remain cautious with the current rally as most of the events are likely priced in and a concentration of bullish positions could force long liquidation and an eventual correction in prices. We maintain a positive outlook on prices in intraday.
Oil prices are also trading lower today with near month WTI futures at $41.79/bbl, down 0.26% whereas Brent is at $44.14, down 0.34% currently. Crude prices rallied sharply last evening driven by the shared sentiment from precious metals but declined eventually ahead of the inventories report at 8.00 pm today. Vaccine hopes, EU stimulus agreements and a much weaker US dollar finally lifted oil through some critical resistance zones, ending nearly two months of range trading. The American Petroleum Institute reported late Tuesday that U.S. crude supplies rose by 7.5 million barrels for the week ended July 17, according to sources. The EIA data, in line with the API report, showed oil inventories increased 4.89 mln whereas gasoline stockpiles fell by 2 million barrels, while distillate inventories increased by nearly 1.0 million barrels. Crude Oil prices are likely to trade with a negative bias and may decline to 3100-3080 in intraday.
by Sam Nair