Commodities Outlooks: Markets trade steady on thin volumes as traders remain on holidays

December 26, 2017

London (Dec 26)  Precious Metals have almost covered up the losses seen in November despite the volumes falling to annual lows during the holiday season. Gold is trading at 28735, up 82 points or 0.29% whereas Silver is at 38071, up 117 points or 0.31% currently.

COMEX Gold fell to a low of 1238.30 in mid-December driven by the FED rate hike and strong macroeconomic releases but the metals have since recovered the majority of its losses despite a drop in volumes and favorable events. Silver has also gained nearly six percent during the same period.

Precious Metals are likely to end the year on a positive note but the short term picture continues to remain shaky. The safe haven demand which has been one of the key drivers for Gold-Silver this year is missing from the markets despite ongoing tensions between the US and North Korea failing to bring back buying into the market.

The markets are expected to remain thin on volumes this week but should trade with a positive bias, the focus being on consumer confidence, pending home sales and the claims report mid-week.

Gold has a trading range of 28700-770 today and is expected to trade with a bullish bias. We recommend considering buying above 28770 for price objectives at 28850-900 whereas, on the downside, sustained trading below 28700 could see traders book profits in the metal. Silver continues to remain within the range of 38000-38150 breaking which directional movement is expected in the metal.

Base Metals trade mixed; should trade with a positive bias

Base Metals are on track to close the best annual performance in 2017 led by a strong economic growth and global mine disruptions. Copper is a higher by over a percent to trade at 465.40 followed by the rest of the metals which are higher by about half a percent each. Aluminum is down 0.32% to trade at 139.15 currently.

Base Metals have individually gained over twenty percent in 2017 driven by mine disruptions, policy changes and stronger demand from the consuming nations. Copper is on track to post its best annual gain since 2010 having gained nearly 30% this year supported by a stronger economy and supply deficits as we step into next year.

Reports from ICSG has also indicated that world copper mine supply may have fallen 2.5% till September 2017 and it is also expected that the deficit may deepen as we move into 2018.

Technically, LME Copper is already trading at a major resistance at 7140 breaking which further upside should be expected this week whereas, on the downside, a profit booking in the metal could eventually push prices below 7000 and possibly lower this week.

Crude Oil could come under pressure as supply returns to the market

Oil is trading in a 17-point range today with the near month contract at 3744, up 8 points currently whereas Natural Gas is up 6.40 or 3.765 to trade at 176.40 since open.

The short-term bias on Crude Oil remains positive but we expect prices to correct marginally in the short term driven by profit booking and reports of returning supply from the North Sea pipeline.

Meanwhile, OPEC ministers have indicated that the oil market would rebalance as we step into 2018 despite increasing production from the US. US inventories continued to decline this year but production levels from shale producers have been at all time highs which have brought back concerns of oversupply despite OPEC efforts to reduce production for an extended period of time.

Technically, oil continues to find strong support at 3730 and a breakdown below this level could trigger a sharp downside in the commodity this week whereas, on the upside, 3810 continues to act as a strong resistance for prices.


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