By Sam Nair
Precious Metals trade steady; focus on FED meeting
Precious Metals continue to trade in a broad range with Gold locked around the $1300 mark ahead of the FED meeting results tonight. Gold is trading at $1297.60, down 0.13% whereas Silver is at $16.91, up 0.14% currently.
The two-day FOMC meeting concludes today and the central bank is largely expected to hike interest rates for the third time this year. While the markets are likely to have priced in the current and third rate hike, the focus will be on the statement or forward guidance which should provide indications for a possible fourth rate hike this year.
A rate hike today may see a minor correction in bullions as the dollar index gains momentum but an increased likelihood of a fourth rate hike could pressure prices significantly in the short term.
We maintain a slightly bearish bias and may see prices decline to $1280.0-$1260.0 in the coming few trading sessions.
Base Metals struggle near highs; could decline on profit booking
Base Metals continue to struggle near previous highs but the increasing volatility and lack of volumes could indicate a potential short-term top in prices. Aluminium is the worst performer at $2280.25, down 0.73% whereas Copper is down 0.08% to trade at $7208.75 currently.
The FED meeting could also trigger an upside in the dollar index and a corrective move in the base metals complex as commodities are inversely correlated with the greenback.
The lack of fresh and persistent catalysts has been keeping prices in a broad trend. LME Copper prices softened over the week with supply issues in BHP’s copper mine eased after unions reached a new labour agreement.
We maintain a bearish view on base metals. Copper may decline to 480.0-475.0 this week whereas Nickel could make another attempt to break support at 1015.0.
Crude Oil continues to remain under pressure; inventories may decline
Crude Oil continues to trend lower pushed lower by fears that the OPEC may increase supply to compensate for Iran and Venezuela’s supply loss breaking out of an agreement to reduce output which has supported prices and helped clear a global glut.
WTI futures are trading at $65.97, down 0.59% whereas Natural Gas is almost unchanged at $2.93 currently.
The OPEC monthly report showed that Saudi Arabia increased its production in May which followed after Trump reportedly asked the OPEC to increase production by 1 mbpd to reduce prices and counter the effects of sanctions on Iran and Venezuela.
With the OPEC due to meet on June 22, the market is largely focused on OPEC’s report and statement for short-term catalysts. The EIA is due to release it weekly crude oil inventories report with analysts calling for a surprise draw in oil stocks and minor builds in refined products.
Technically, Oil prices are likely to remain under pressure and may test support at 4390.0-4320.0 this week whereas, on the upside, a break above resistance zone at 4500.0-4520.0 could see a minor recovery in prices.
(Sam Nair is AVP - Commodities with Stewart and Mackertich Wealth Management Limited)
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