Commodities rally after fiscal packages and production cuts improve sentiment
Commodity Online | April 07 2020
UPDATED 16:59:38 IST

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Precious Metals are pushing higher today with Gold futures trading at $1704.30/oz, up 0.63% while Silver is higher by nearly three percent to trade at $15.59/oz. Precious Metals rallied driven by support from the FED’s financial stimulus package and a weaker unemployment report last week which showed that non-farm payrolls fell by 701,000 in March and unemployment rate rose sharply to 4.4% which was significantly weaker than expected. Technically, Gold remains in a bullish trend with prices breaking above key resistance at $1700.0 and a daily close above this level would signal a stronger rally in prices to $1750.0-$1785.0 in the immediate near term whereas on the downside, $1650.0 will act as a key support for prices. Silver futures are also likely to rally to $16.50 and subsequently to $17.50 following Gold while support is seen at $15.0 in the short term.


Base Metals are trending higher today with Copper gaining nearly 3.50% to $5081.0/ton followed by Zinc at $1935.0/ton, up 2.08% while the rest of the metals are higher by nearly a percent each. Copper prices have picked up today driven by spot demand amid reports of coronavirus slowing down and the shutdown of major productions globally. Another key factor driving metals has been the lower level of inventories across LME. Going ahead, a fiscal stimulus package from China could be further bullish for base metals in the short term. We maintain a bullish view on Copper prices and see it test $5250.0-$5500.0 in the near term along with the other metals but with a view that resurgence in cases of Covid-19 could see a sharp reversal and another round of selling in metals.


Oil prices are trading higher today with WTI higher by over three percent to $26.89/bbl whereas Brent prices are higher by 2.69% at $33.94/bbl. The recovery in prices are building on reports that OPEC+ along with the US may be meeting on Thursday to discuss a co-ordinated global output cut which could help reduce the current oversupply and boost prices. US President Donald Trump said he would impose tariffs on crude imports if necessary to support US oil sector and the head of the International Energy Agency has said oil inventories would still rise by 15 million bpd in the second quarter even with output cuts of 10 million bpd. The lower prices have also seen a drop in drilling rigs and activity and may push US oil producers to bankruptcy if it continues. The current market sentiment is largely hopeful towards a production cut from Saudi Arabia and Russia and we may see WTI prices rally to $35.0-$40.0 in the short term. On the downside, $25.0 will act as a key support and if broken may see selling pressure emerge in the short term.


Sam Nair