Commodities Outlook: Metals trade steady, Oil hits fresh highs

May 7, 2018

London (May 7)  Precious Metals are trading with a neutral bias today with Gold at 1313.50, down 0.09% whereas Silver is at 16.47, down 0.30% currently.

 Precious Metals returned lower after gains seen last week as traders booked profits spurred by the strength in the dollar index. Precious Metals have recovered from lows but continue to struggle with the rally due to a lack of buying momentum which was earlier spurred by safe haven demand and geopolitical tensions which have subsided significantly in the near term.

 Speculators cut their net long positions in COMEX gold by 62,378 contracts to 51,985 contracts in the week to May 1, data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday. Holdings of the world’s largest gold-backed exchange-traded fund, New York-based SPDR Gold Shares, fell 0.17 percent to 864.13 tonnes on Friday.

 With the continuing weakness in the rupee, downsides in the international market is not being reflected on the domestic bourses. Gold finds strong support in play at 1310.0 breaking which the psychological support at 1300.0 should come into play. On the upside, 1318.0 should act as a major short term hurdle for prices.

Base Metals trade in a range as LME remains closed

 With the LME markets remaining closed on a Bank Holiday, base metals are taking cues from the Asian session and should track the CME Copper in the later session. Copper futures, trade on CME, are at 3.084, down 0.05%.

 On the domestic markets, Zinc and Nickel are higher by about a percent at 207.45 and 942.50 respectively. Copper is up 2.60 or 0.56% to trade at 460.00 currently. Shanghai zinc climbed off nine month lows to rally 1 percent on Monday largely driven by short covering after having fallen to fresh lows.

 The focus this week will be on macro-economic releases from China which is expected to show strong growth in industrial output and exports. Trade negotiations between the US-China should once again take the front seat and drive Copper and Nickel prices after talks failed last week.

 The technical bias remains neutral and we expect prices to remain range bound in intraday.

Crude Oil hits new highs on Venezuela, Iran tensions

 Crude Oil is trading higher by almost a percent at 70.38 whereas Natural Gas is down 0.26% at 2.70 currently.

 Oil prices are pushing to fresh highs reaching its highest level since November 2014 boosted by the Venezuelan crisis and increasing worries of sanctions on Iran by the US.

 Venezuela’s output has halved since the early 2000's to 1.5 million barrels per day (bpd), as the South American country has failed to invest enough in its oil industry along with an internal crisis and struggle for power which has seen exports and production decline at a rapid pace.

 There is also an increasing concern that President Trump may withdraw from the Iranian nuclear deal which would see sanctions being re-imposed on OPEC second largest exporter of oil.

 It also worth noting that the market seems to continuously ignoring the soaring US output which is at 10.62 mln, just behind Russia and the increasing number of oil rigs which point to a further growth in shale output.

 Technically, prices continue to remain in an uptrend but with momentum indicators fast approaching the overbought region, a short term correction may be expected in the near future. On the upside, resistance is at 70.55 whereas on the downside, support comes into play at 69.80 and then further lower at 68.70 today.


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