Commodities Outlook: Precious Metals rally, Base Metals and Oil trade with a bearish bias
Commodity Online | June 14 2018
UPDATED 18:07:44 IST

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By Sam Nair
Precious Metals gain after FED announces 25 bps rate hike

Gold is trading at 1308.50, up 0.55% whereas Silver is at 17.15, up 0.97% currently. 

Gold and Silver ended the session near its day’s highs after the Federal Reserve announced a 25 bpd rate hike in a widely anticipated move. While the rate hike was already factored into the markets, the hawkish tone weighed on the dollar index which was in reference to the number of rate hikes this year, which according to the dot plot, now stands at four.

The focus today will be on unemployment claims and retail sales data scheduled at 6.00 pm. Though it is too early to comment on a potential upside, persistent weakness in the dollar index and rising inflation may push Gold higher to 1320.0-1330.0 in the near future.

Another noticeable development has been in Silver which has gained in six of the previous seven sessions and is expected to approach mid-April resistance levels at 17.20 this week.

We maintain a bullish outlook on bullions.

Base Metals continue to struggle; Intraday bias negative

Base Metals are trading on a weaker note today as the lack of fresh catalysts continues to keep prices in a range. Nickel is down 2.38% to trade at 15285.00 whereas Copper is down 0.63% to trade at 7194.25 currently.

According to Chinese customs data released on June 8, imports of unwrought copper climbed to 475,000 in May, up 22% YoY to its highest level in 17 months whereas imports during the period of January-May reached 21.5 mln tons, up 16.7% YoY.

Imports of ores and concentrates were also up 14% in the January-May period. The sharp jump in imports has been Beijing’s decision to ban the import of certain types of Copper scrap which was announced in April.

The intraday bias continues to remain weak for the Base Metals complex. Copper is expected to test 480.0-475.0 this week whereas Nickel should also trend lower to 1030.0-1025.0.

Crude Oil trades higher after surprise draw in inventories

Crude Oil is trading marginally higher today after last evening’s rally as the EIA reported a surprise draw in stocks for both crude oil and refined products. WTI Crude Oil futures are trading at 67.03, up 0.59% currently whereas Natural Gas is down over half a per cent to trade at 2.94. 

The report that OPEC and Russia may consider increasing their oil output to compensate for supply losses from Iran and Venezuela continue to weigh on prices in the short term. OPEC is due to meet on June 22 to discuss oil output policies.

While global demand forecasts remain strong, the supply side issues may put further downside pressure on oil prices as OPEC’s supply decision, increasing US production act as bearish catalysts for prices in the short term.

Technically, oil prices are trading into an unsloping channel with 66.80 acting as the most recent resistance zone. We maintain a bearish outlook on Crude Oil.

(Sam Nair is AVP - Commodities with Stewart and Mackertich Wealth Management Limited)

The views and ideas expressed above may have been suggested to the clients of SMIFS Finance Ltd. It is advisable that investors/traders should consult with their Certified Experts before taking any investment decisions.

Commodity Arrivals Rate
Mustard Oil 13.31 10500.00
Coconut Oil NR 15700.00
Arecanut 3.5 2200.00
Gur 0.6 2550.00