Commodity prices fall as precious metals correct 1%, crude oil sinks by 5%; consolidation phase to continue

Commodity prices fall as precious metals correct 1%, crude oil sinks by 5%; consolidation phase to continue

By Saumil Gandhi

Most of commodities’ prices moved towards southward direction in last week except natural gas. Precious metals have corrected more than 1.0% last week amid expectation that the Federal Reserve will continue its aggressive monetary tightening to curb inflation. In energy complex, Crude oil prices tumbled by almost 5.0% as concerns over slowing economic growth after series of weaker than expected US macro data which could likely to hurt crude oil demand. While Natural Gas prices ended up by 5.0% on the back of short covering rally. Base metals price came under pressured following disappointing manufacturing data and as fresh concerns emerged over tensions between the US and China.

Comex Silver prices dropped by 1.04% at $25.08 per ounce, registered first weekly declined after five consecutive weeks gained. MCX Silver July future settled lower by 1.22 % to Rs 75944 per kg for the week. The weakness in silver was unfolding despite very favorable Silver Institute deficit predictions earlier this week, signaling the silver market is focused on spillover fear from big-picture macroeconomic selling of physical commodities. It should also be noted that in the prior 3 days, silver ETF holdings have seen large outflows above 5 million ounces, suggesting investors might have banked profits on the recent rally.

Looking forward, we expect consolidation phase will continue in bullion with negative bias. Comex spot gold having immediate support at $1965 per ounce if price breaks this support it will likely to fall towards $1950/$1935 per ounce. For this week Comex spot gold having resistances at $2005/$2033 per ounce and supports at $1950/1935 per ounce. MCX Gold June future has resistances at Rs 60700/61400 per 10 grams and supports place at Rs 59100/58600 per 10 grams. Comex Spot silver having resistance at $ 26.25 per ounce and support at $22.70 per ounce. MCX Silver July future price face resistances at Rs 76900/77505 per 1kg and find supports at Rs 75270/73960 per 1 kg.

(Saumil Gandhi, Senior Analyst (Commodities), HDFC Securities. Views expressed are author’s own. Please consult your financial advisor before investing.)