By Sam Nair
Precious Metals come under pressure as market focuses on inflation report
Precious Metals are trading lower today as the market looks ahead to the producer prices report in the evening. Gold is trading at 29450, down 161 or 0.54% whereas Silver is down about a percent to trade at 39593 currently.
The overall intraday bias remains weak currently as the market focuses on Yellen’s speech and macroeconomic releases in the evening. Producer prices saw a rebound in September supported by services whereas the October figures are expected to come in lower – forecasters see the monthly index recording a 0.1% gain whereas the core figures might see just a gain of 0.2%.
A weaker than expected report could see some recovery in precious metals later. Gold has been unable to recover from Friday’s crash despite making an attempt at rallying last evening and we believe that stronger economic releases may push prices further lower this week.
Gold sees a minor intraday support at 29450 and the downside is expected to gather fresh momentum below this level with the next support levels coming in at 29330-280 whereas, on the upside, resistance at 29500 should cap rallies in the yellow metal. Silver continues to trade in the range of 39300-40000.
Base Metals trade in a broad range; overall trend remains negative
Base Metals are trading with a negative bias today after reports showed that the Chinese economy slowed down further in October. Nickel is down nearly two percent at 802.60 followed by Lead at 163.05, down nearly a percent. Copper is trading at 449, down 0.61% currently.
Base Metals are under pressure after data from the world’s largest consumer showed that the economy may be slowing down despite strong inflation reports. Retail sales, foreign investments and industrial production missed expectations after imports also slowed down according to the government reports seen last week.
China is already struggling with high levels of debts and pollution and recent efforts to cut down on polluting mines and supply reductions have played a major role in pushing prices higher in the short term.
Base Metals are trading in a broad range but the overall bias continues to remain weak in the short term. Despite the drop in the correlation between the group metals, we feel that Copper will still dominate the short term bias and push metals lower in the weeks ahead.
On the upside, 453 continues to act as a major resistance for the metal with Copper failing to break above for the third time in the last two weeks indicating a negative bias on the metal whereas, on the downside, a breakdown below 440 support should see short selling gain momentum in the short term.
Crude Oil consolidates further; May decline in the evening session
Oil prices are consolidating for the sixth consecutive session despite reports from producing countries forecasting a stronger demand and quicker rebounding of the markets. Crude Oil is trading at 3703, down 16 points or 0.46% whereas Natural Gas is down nearly four percent to 203 currently.
The International Energy Agency (IEA) released its monthly oil report saying that US output could be the primary contributor to increasing global supply in the years to come supported by improving shale technologies and resilient producers.
In this scenario, either the OPEC/non-OPEC countries will have to significantly reduce outlook to balance the market in the short term. OPEC is expected to extend its production cuts beyond March 2018 when they meet in Vienna on November 30. The market has also been holding steady near record highs despite the inventories report from the US indicating a buildup in oil and refined products over the previous week.
The current range for oil prices if 3750-3680 breaking which prices should witness momentum based trending moves. We maintain a slight negative bias on the commodity and expect prices to decline to 3680 in the short term whereas further selling is expected if prices break below the support level. On the upside, a breakout above 3750 should push prices higher in the short term.
(Sam Nair is the Head of Commodities Research at Celebrus Commodities Limited)