By Sam Nair
Precious Metals trade higher after meeting minutes; Unemployment claims in focus
Precious Metals are trading slightly higher today after the FED meeting minutes showed that the central bank remained divided on the decision to raise rates in December. Gold futures are trading at $1297.43/oz, up $8.50 or 0.66% whereas Silver is trading higher by about half a percent to trade at $17.232/oz.
Minutes from the Federal Reserve’s September meeting showed that several policymakers remained unsure about the December rate hike, given the persistent weakness in macroeconomic data releases over the past few weeks. The minutes also indicated that even though another rate hike was likely, it would mostly depend on inflation data over the next few months.
According to CME group’s FED watch tool, fed funds futures are pricing in an 81.7% chance of a rate hike in December, down from 87% before the minutes. The focus today will be on the claims and PPI report both of which are expected to improve over the previous releases and that could push bullions lower in intraday.
In intraday, support for Gold is seen at Rs.29, 800 and then further lower at Rs.29,700. On the upside, a breakout above resistance at Rs.29, 900 should push prices to Rs.30, 000-Rs.30, 100 today. For Silver, support is at Rs.40, 200 and resistance is at Rs.40, 400-Rs.40, 500.
Base Metals trade higher as rally extends for the fourth day
Base Metals are trading higher extending gains for the fourth consecutive day driven by concerns of falling stocks across key markets. Base Metals are trading slightly in green today with Copper at Rs.448.45, up 1.45 or 0.32%.
We maintain a cautiously bullish stance on base metals. Even though the fundamentals and immediate term sentiment indicate a positive trend, the price rally over the recent weeks looks unsustainable given the amount of bullish interest in the market.
Copper is approaching a key resistance at Rs.450 from where a pullback is expected in the coming days whereas Nickel could extend the recent rally if it breaks above resistance at Rs.733. The trio of Aluminum, Lead and Zinc are seen settling into a broad range and should continue to consolidate in near future.
Crude Oil declines as API reports build in oil storage
Crude Oil fell sharply after the API reported a build in oil storage during the previous week. NYMEX Crude Oil for near-term delivery is trading at $50.52, down 1.52% whereas domestic prices are trading at Rs.3, 293, down 55 points or 1.64%.
The American Petroleum Institute (API) reported that commercial crude oil inventories in the US may have increased 3.097 mmb in the previous week whereas gasoline stocks may have decreased 1.575 mmb and distillates may have increased by 2.029 mmb.
The build in crude oil stocks doesn’t come as a surprise as hurricane Nate shut down almost 80% of the refining capacity along the Gulf of Mexico over the previous week.
The EIA report estimates show a contrasting picture with weekly stocks for both crude oil and byproducts expected to decline in the previous week.
A drop in inventories is likely to bullish for oil prices in the evening. The IEA monthly oil report also forecasted stronger global demand for oil in 2018 despite rising supply which should also limit downsides for the commodity in the short term.
Crude Oil finds support at Rs.3,260 breaking which the short term trend is expected to turn bearish whereas, on the upside, a breakout above resistance at Rs.3,330 should push prices higher in intraday and this week.
(Sam Nair is the Head of Commodities Research at Celebrus Commodities Limited)