Precious Metals also trading lower today after the WHO update and global equities continue to crash further driven by fears of a recession. Gold futures are down 0.23% to $1638.30/oz whereas Silver is down nearly a percent at $16.64/oz since early trade today. We continue to maintain a cautiously bearish view on prices, firstly due to potential downside risks in global equities and the strength in the dollar index and secondly, due to the high number of speculative longs in the positioning which could lead to a massive unwinding of positive and sharp declines in the near term. Over the short-medium term, we maintain a positive view as easing monetary policy and slower economic growth could translate into demand for safe haven assets. On MCX, Rs.43200.0 is seen acting a good support level today breaking which prices may decline sharply while Silver prices find good support at Rs.45200.0 today.
Base Metals fell further as the WHO declared the Coronavirus outbreak as a global pandemic which raised fears of a slowdown in global economic growth and lower demand for the industrial metals. Three month Copper futures are down 1.70% at $5415.50/ton while Nickel is trading lower by almost three percent at $12087.50/ton on LME today. The outbreak of the virus has resulted in a pile up of metal stocks on both London Metals Exchange (LME) and Shanghai Futures Exchange (SHFE) which is further weighing down on prices. In the short term, Base Metals should continue to remain subdued led by falling demand and slower economic activity and is expected to recover as the virus is contained and as the US-China trade war’s second phase of agreement comes to a conclusion. We maintain a bearish view and expect prices to possibly decline to fresh lows in the domestic market as the contagion continues to spread further indicating to a prolonged recovery in prices in the short-medium term.
Crude Oil prices are being hammered further after the pandemic update by WHO with WTI prices down 5.52% to $31.16/bbl whereas Brent prices are down over six percent to $33.60/bbl today. The oversupply situation seems to be getting worse for crude oil after the US banned all travel from Europe in a bid to contain the spread which means a further drop in jet/aviation fuel in a market where the demand is already struggling to keep up with the supply. Saudi Arabia and Russia raised the stakes in the current oil war by increasing output and cutting prices in a bid to control market share even though sources indicate that there may be an agreement to cut output between OPEC+ members. MCX Crude Oil has lost nearly 40% since February 21 and is likely to extend losses to Rs.2100.0-Rs.2000.0 in the short term. The upsides are likely to be limited to short covering rallies which should be ideally seen as an opportunity to short sell unless we have an event that brings about structural change in the physical oil market.
AVP Commodities Research