By Sam Nair
Precious Metals decline further; focus on consumer prices
Gold futures are trading at 1318.20, down 0.20% whereas Silver is at 16.49, down 0.28% currently.
Precious Metals continue to consolidate as the lack of market events and favourable news keep traders on the sidelines. The intraday bias is neutral and the focus should be on the consumer prices report in which the core rate is expected to show a limited increase, up 0.2% with YoY expected to rise to 1.9%.
The headline CPI figures are expected to grow 0.2% on a monthly basis whereas the annual rate should be up 2.2%. Precious Metals may come under further pressure if the inflation reports meet expectations today. It is also important to note that the inflation report will also be key to the central bank's decision on rate hike when they meet next week.
Gold is trading just a shade above its key support at 30300 and should it break, our short-term outlook would turn bearish and call for prices to decline to 29800-29500 in the immediate term. Silver is also trading into the range of 38600-38850 today.
Base Metals consolidate further; intraday bias neutral
Base Metals have shrugged off their weak opening to rally sharply with Lead and Zinc trading higher by over a percent each. Copper is trading at 6925.00, down 0.13% currently.
Despite the sharp recovery, the intraday bias continues to remain neutral as prices are still below their key resistance levels. The recent correction in the base metals was largely driven by increasing inventories, profit booking and uncertainty surrounding import tariffs from the US.
According to CFTC's weekly COT report, managed money investors have reduced net longs to below 28,800 contracts from over 100,000 contracts from September 2017.
The large drop in positions is also in line with increasing inventories which is up almost 90,000 MT in the current year. Chinese counterparts have also slashed their positions on Copper futures over the last two days, according to data from SHFE.
Technically, we maintain a very cautious approach as we still believe that prices may decline further in the short term. While the medium-term fundamentals remain unchanged, the short-term factors or events could weigh on prices sinificantly.
Crude Oil trades steady as traders await inventories report
WTI Crude Oil prices are trading at 61.58, up 0.36% whereas Natural Gas is higher by nearly a percent at 2.80 currently.
Crude Oil is struggling to gain momentum as traders fret over increasing US production which could possibly erase the supply cut efforts from the OPEC and Russia. While inventories for both oil and refined products have been declining in the US, higher rig counts and active hedging has seen the daily US shale production hit new highs which are already higher than Saudi and is expected to overtake Russia before the end of 2018.
The EIA has forecasted a stronger period of global demand but the US production continues to raise worries over the oil glut. Hedge funds and money managers pared their bullish wagers on U.S. crude oil, with long positions falling last week for the first time in three weeks whereas gross short positions are at its highest level in a month.
In intraday, support is seen at 3950-3925 whereas 4000 is the resistance on the upside. Natural Gas should rally further if it breaks above resistance at 182 in intraday whereas a close below 180 would call for a reversal of the current trend.
(Sam Nair is the Head of Commodities at Stewart & Mackertich WML)