FED forecasts further weakness in the short term; metals trade steady
Commodity Online | April 30 2020
UPDATED 18:02:35 IST

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The Federal Reserve signalled that it would keep interest rates near zero for over a year and perhaps long until the economy picks up again. They also acknowledged that the current crisis will have a prolonged and significant risk to the economy in the medium term. The QE program launched by the FED on March 15 saw the central bank purchase $75 billion in Treasuries and $50 billion in mortgage-backed securities daily which has now been tapered to $10 billion in Treasuries each day and $8 billion in MBS.

 

Precious Metals continue to consolidate in the current range. MCX Gold is trading at 45660.0, up 0.27% whereas Silver is trading at 42310.0, up over a percent currently. Despite the recent releases of weaker macro-economic data’s, precious metals have been holding steady in the current range as the likelihood of the US economy restarting keeps risk-off traders away from the market. The declines in FED purchases have also contributed to the recent consolidation despite which we continue to maintain a bullish view in the short term. In intraday however, we maintain a slightly negative bias and may see Gold test our key support at 45200.0 while Silver may erase gains to test support at 41600.0 today. The focus today will be on the Unemployment Claims and PCE Report in the evening.

 

MCX Crude Oil is trading at 1340.0, up over 13% today whereas Natural Gas is down by nearly a percent at 141.90. The upbeat trend in Crude Oil is likely due to the OPEC+ production cuts which are kicking in tomorrow along with reports from other countries who are scaling back on production due to lower prices. While we may see some recovery in prices to resistance at 1400.0-1420.0, the short term bias remains inclined to the lower side as demand is yet to recover and storage problems continue to haunt the market. The NG Storage report is due at 8.00 pm today which is expected to show an increase of 69 BCF compared to an increase of 43 BCF last week.

 

Base Metals are settling into a range for the third consecutive day and we maintain a very neutral outlook on prices in intraday. Copper is trading at 407.25, down 0.22% and is trading in a range of 406.0-410.0 whereas Nickel is down by around half a percent at 933.80 with intraday supports at 932.0 and 927.0 whereas resistance is at 940.0. CME Group’s readings for Copper futures markets showed open interest extended the downside on Wednesday, shrinking by around 2.8K contracts. In the same direction, volume retreated for the second day in a row, this time by around 15.4K contracts. The decline in OI positions over the past few week during the price rally could indicate another correction in the Copper in the short term.

 

Sam Nair



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