By Sam Nair
Precious Metals trade steady; dollar weakness support prices
Precious Metals are trading steady today with Gold futures at 1318.80, down 0.14% whereas Silver is at 16.65, down about half a percent in intraday.
Both Gold and Silver are trading with a weak bias in intraday as the dollar index continues to weigh on the prices. The dollar edged lower against a basket of the other major currencies, putting it on track for its fourth down session in a row.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down around 0.2% at 92.21. The index hit four-and-a-half month highs of 93.26 last Wednesday before retreating to end the week almost unchanged, as tame U.S. inflation data tempered expectations for a faster pace of rate hikes by the Federal Reserve. The progress between US and China on trade talks should also continue to keep traders on their toes in intraday.
The technical bias is slightly negative on prices with downside supports placed at 31430.0 and then further lower at 31380.0 whereas, on the upside, 31540.0 should act as a solid support for prices in intraday. Silver is also trading lower today and further downside can be expected if prices break below 40350.0 whereas on the upside, resistance is seen at 40500.0.
Base Metals trade volatile; intraday bias negative
Base Metals are trading with a mixed bias today with Zinc down over a percent at 3046.0 whereas Copper is also down by 0.89% to trade at 6859.0 currently. Nickel is trading higher by about 2.24% at 14357.50.
The intraday bias on base metals is negative as the market is expected to trend lower as trade talks between the US and China resume. Nickel should extend gains in the short term after breaking above short-term resistance at 955.0 whereas Copper and Aluminum might decline further in the short term. The increasing worries over the US-China trade talks should continue to weigh on both Copper and Aluminum prices.
Crude Oil trades higher; OPEC monthly report increase in production
Crude Oil futures are trading at 70.78, up 0.11% whereas Natural Gas is trading at 2.82, up nearly half a percent.
Crude was seen under pressure in the early session but recovered sharply ahead of the US open after the monthly OPEC report was released. OPEC’s total crude output rose by 12,000 barrels a day in April led by increases in Saudi Arabia and Iran which may be producing move ahead of the US sanctions.
Venezuela production also showed a drop of 41,000 barrels a day in the previous month as the country struggles with its economy. OPEC also revised its global supply-demand forecasts stating that global oil demand was expected to rise further to 1.65 mbpd this year vs 1.63 mbpd as stated in the previous release whereas non-OPEC supply in 2018 was expected to grow at the rate of 1.72 mbpd compared to 1.71 mbpd earlier.
OECD oil inventories declined in March to stand 9 mln barrels above latest 5-year average which is closest yet to supply cut deal's original target suggesting a depleting stock level. OPEC also signalled it could fill in any supply gap if renewed U.S. sanctions curtail supply from Iran as Saudi, Kuwait and UAE could act as a cushion in the short term.
On MCX, oil futures are trading slightly in red at 4776.0, down 17 points but the overall picture continues to remain bearish. We expect prices to decline further if it breaks support at 4740.0 and test 4700.0 and possibly lower today whereas, on the upside, 4800.0-4820.0 could be resistance on the upside.
(Sam Nair is AVP - Commodities with Stewart and Mackertich Wealth Management Limited)
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