Precious and Base Metals trade in a range; Crude Oil erases early gains
London (Mar 5) Precious Metals are trading marginally higher today supported by a weakening dollar which extended losses after fears of a possible trade war weakened the greenback and riled stock markets again. Gold is trading at 30513, up 65 points whereas Silver is at 38954, up 104 points currently.
Donald Trump commented late last week that the US may consider increasing import duties on all Nickel and Aluminum products from all countries in a bid to protect and sustain the domestic industry sparking concerns that other economies might consider slapping duties on various products in retaliation which could eventually lead to a trade war between major countries.
The decision to levy import duties could have far-ranging implication on the physical market creating a potential imbalance in the demand-supply equation and affecting companies and jobs worldwide. On the data front, we have the non-manufacturing PMI report from the US which analysts expect to weaken in the previous month.
We maintain a positive outlook on bullions and would expect prices to move higher this week and would recommend considering a buy on dips strategy. Gold faces a strong support at 30550 in intraday whereas, on the downside, support comes into play at 30450 and then further lower at 30400.
Silver is trading above its key weekly resistance at 38750 which should act as a resistance this time around and limit downsides while on the upside, fresh resistance levels are expected to come in at 39600.
Base Metals trade mixed today; Zinc stocks gain a record 59% on LME
Base Metals are having a mixed trading session today but continue to trade in red since open. Zinc is the major loser trading at 3307.75, down 1.76% followed by Lead and Nickel. Copper futures are trading at 6895.50, down 18.50 or 0.27%.
Zinc stocks stored in registered warehouses on the London Metals Exchange (LME) saw its largest single-day gain of 77,275 MT, a 59% increase which is the highest since 1989 taking the total tonnage stored physically across the exchange to 209,050 MT.
All the registered increase was seen at the New Orleans warehouse storage site indicating a physical dumping in the North American region. The large supply of stocks on warehouse could reflect a potential top in Zinc prices in the short term.
The on-warrant stock levels also doubled to 162,825 MT. Base Metals are under a sector-wide correction as higher prices, building inventories across LME and SHFE force traders to book profits.
Zinc could correct further if it breaks below support at 216 with the next support levels coming into play at 212-213 today whereas, on the upside, a break above resistance at 218 could see prices rally higher. Copper is trading in the range of 450-454 and we maintain a negative bias on prices and see strong selling pressure below the support level.
Oil trends lower after early gains; OPEC, US shale producers to meet at CERAweek
Crude Oil is trending lower after a strong open and may extend losses further into the evening session. WTI Crude Oil is trading at 61.41, up 0.26% currently whereas Natural Gas is down about half a percent at 2.68 currently.
OPEC and US shale oil producers are expected to meet at the annual CERAWeek energy conference in Houston and rumours of a coordinated effort between both the players are unfounded and the conference is expected to be uneventful.
OPEC has been critical to the oil market since 2016 when they decided to cut production and exports in a bid to reduce the global supply glut and support prices whereas the increasing US production has been a major cause of concern. On the data side, builds in oil and byproducts storage in the US along with an increase in oil rigs has forced some profit booking in prices last week.
Technically, the short-term picture calls for further upside in Crude Oil but chances of a minor pullback cannot be ruled out and a buy-on-dips strategy may be considered. On the downside, support comes into play at 3940 and then further lower at 3840 whereas, on the upside, resistance is seen at 4030 and then further higher at 4085.
Reuters
