Commodities remain weak despite FED intervention with stimulus; further weakness expected
Commodity Online | March 13 2020
UPDATED 17:08:34 IST

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Precious Metals fell sharply last evening with Gold losing 2.65% to close at Rs.42206/ten grams whereas Silver lost nearly 4.8% to end the session at Rs.44139/kg. Despite the FED having injected huge liquidity into the Treasuries market, bullions failed to hold onto its gains and are trading lower today with both Gold and Silver down 1% and 2% respectively. Following closely on the heels of the FED, the European Central Bank, on its part, on Thursday launched a series of monetary policies in a bid to support the financial markets and boost economic growth. Precious Metals tend to perform during periods of monetary easing as was the case during the financial crisis of 2008 when the FED launched Quantitative Easing (QE) in a bid to support economic growth. The focus now shifts to the FED’s meet next week where they are widely expected to announce another rate cut and possible monetary stimulus packages which could be positive for precious metals. Despite the support from central banks, the downside remains a very real threat for prices as record speculative positions and crashing equities may affect precious metals in the immediate term. We maintain a neutral bias in intraday.

 

Crude Oil prices have steadied over the last few days above support as Rs.2250.0 and the suffering will continue as worries of slowing demand were further stoked after President Trump announced a 30-day ban on travel to and from Europe. The oil war between Saudi and Russia is already weighing on prices along with the virus pandemic which has reduced demand for oil drastically across the globe and pushed prices to its lowest level in 5 years. OPEC+ members also cancelled a recent JMC meeting after the recent fallout which further reflects the growing tensions between OPEC members. Technically, MCX Crude oil is trading into a broad range of Rs.2250.0-Rs.2650 and directional movement is expected once prices move out the current zone. We continue to maintain a bearish view on prices in the short term.

 

Base Metals are trading higher today on the back of short covering after prices declined for four consecutive sessions. MCX Copper is trading at Rs.425.20, up 3.05 or 0.72% whereas Nickel has rallied nearly six percent to Rs.947.10 since morning today. We continue to maintain a bearish outlook on base metals in the short term as global economies struggle with the slowdown. However, the intraday bias is slightly biased to the upside as we may see prices recover marginally due to short covering today.

Sam Nair
AVP Commodities Research



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