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Tapan Patel

Commodity prices traded volatile with base metals and crude oil prices higher on positive global cues while bullion prices traded down on risk-on sentiment. Crude prices extended the gains rallying more than 11 percent on extension of output cut deal.

Copper, lead and nickel prices led the gains among the base metals on improved demand outlook while bullion prices shed 2 percent as buying in riskier assets faded demand for safe haven. The dollar index fell by more than 1 percent on improved risk sentiments which supported commodities to trade firm.

Bullion prices ended in the red for the third week with liquidation in safe haven assets on improved investment sentiments for riskier assets. The spot gold prices at COMEX ended down by 2.6 percent at $1,681 per troy ounce while Silver prices also traded down by 2.5 percent despite of rally in base metals. Gold prices traded weak as ease of lockdown and reopening of the economic activities boosted optimism over economic recovery.

The strong equity indices with supportive economic data from US and China dampened safe haven demand for gold and silver. The better than expected job market numbers from US showed strong sign of economic growth in May which led to the selloff in gold prices on Friday. The Gold ETF holdings at SPDR Gold Shares declined by 0.4 percent to 1,128.11 tonnes on Friday.

Crude oil prices extended gains with prices rallying for the sixth-week on the trot on demand growth prospects and reduce in oil glut. The benchmark NYMEX WTI crude oil prices rallied by more than 11 percent to $39 per barrel for the week while ICE Brent oil gained by nearly 20 percent to $42.30 per barrel.

Natural gas prices fell by 3.62 percent on weak demand on mixed weather conditions. Crude oil prices continued upside on economic growth optimism along with equity indices. The oil output cut effects from major oil producers have supported oil market to balance reducing the glut. The OPEC plus nations extended the output cuts of 9.7 million barrels per day till end of July adding fuel to the crude oil prices rally.

The US crude oil and natural gas rigs count continued to hit lows as many of US energy firms have shut productions. The total crude oil rigs fell by 16 to 206 to the lowest since June 2009, as per data published by Baker Hughes.

Base metal prices traded strong for the week on positive global cues on improved investment sentiments. Base metals prices witnessed buying across board with strong equity indices as reopening of economic activities improved demand outlook for industrial metals. Copper, Nickel and Lead prices rose by nearly 5 percent while zinc and aluminium prices followed the trail.

Base metal prices traded higher on higher stimulus amount from ECB and positive US job market report. Copper inventories at China declined by 5,075 tonnes to 1,39,913 tonnes while Aluminium stocks fell by 29,717 tonnes as per the data released by SHFE. The Aluminium prices has showed sign of recovery with rise in imports from China.

We expect base metals to trade sideways with MCX Copper June having an important support at Rs 425/420 per kg and resistance at Rs 442/448 per kg for the coming week.

The author is Senior Analyst – Commodities at HDFC Securities.

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First Published on Jun 9, 2020 09:00 am

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