By Sam Nair
Precious Metals trade higher after Friday’s sell-off
Precious Metals have opened higher in early trade after the late night sharp selloff seen on Friday. Gold futures are trading at 29580, up 89 or 0.30% whereas Silver is up 0.18% to 39577 currently.
The focus this week will be on the ongoing tensions between Saudi and Iran along with a large batch of macroeconomic releases from the US. The possibilities of a war remain low but the escalating cold war and diplomatic issues are likely to provide a safe haven boost to precious metals in the foreseeable future.
On the data front, the key data due is the inflation report along with retail sales, producer prices and industrial production and reports on the housing market is due which should keep traders engaged over the week.
The FED is also due to meet in mid-December when they are expected to hike the rates for the third time but any major changes to the macro figures could alter the trajectory of rate hikes which in turn could affect bullions.
The technical picture has been distorted marginally after the sharp crash last Friday which saw Gold dip below key support at 29500. On the higher side, we expect the uptrend to resume once prices break above resistance zone at 29600-650 with 30000 being our target price during the current expiry whereas another drip below 29500 should negate the current upside and push prices significantly lower in the short term.
Base Metals trade in a range; Downside expected
Base Metals are trading marginally higher but the overall bias continues to remain negative. Nickel is the best performer today, trading higher by about two percent at 805.50 followed by Copper at 446.10 which is higher by about half a percent.
The trend bias is increasingly negative and the failure of prices to move higher despite strong inflation numbers from China last week indicate reluctance on the part of traders to build long positions in the metals group. According to the customs report, a sharp drop in refined copper imports could weigh in on prices in the short term.
While the correlation between the metals has decreased drastically over the last few months, we still believe that Copper should continue to dominate the overall bias. Copper continues to trade in the range of 443-453 and a daily close below the lower range should push the metal into a sharp corrective mode over the next few weeks whereas, on the upside, only a breakout above resistance at 453 would reverse the short-term picture and call for sharp downsides in the short term.
Oil consolidates near highs as market focuses on OPEC report
Oil prices are extending the consolidation for the fourth consecutive day as the market focuses on the Middle East situation. Crude Oil for November delivery is up 5 points at 3717 whereas Natural Gas is down about a percent at 207.30.
Escalating tensions between Saudi Arabia and Iran which has the potential to disrupt the oil supply are underpinning prices in the immediate term. OPEC is also due to release its monthly oil market report which could provide key insights into compliance from OPEC and current production levels along with short-term demand forecasts.
We continue to remain bullish on prices in the short term but expect a minor correction over the next couple of week as traders should continue to book profits after the sharp gains in recent months. There is also an increasing chance that higher oil prices could bring shale producers back online whose hedging activity has increased significantly in the recent weeks.
The current range for Crude Oil is 3680-3750 and a daily close out of this range should see strong directional moves in the commodity this week.
(Sam Nair is the Head of Commodities Research at Celebrus Commodities Limited)