Commodity prices continued to trade positive for the second week with dollar extending the losses. Base metals complex was trading higher from the starting of the week on supply concerns and higher demand outlook. Crude oil prices were trading up with shut in production and refinery operations in Gulf of Mexico on hurricane threat.
Bullion prices managed to close in green witnessing sharp recovery in the second half of the week on safe haven buying. Commodity prices were lifted higher as Dollar index fell by nearly 1 percent for the week after US Federal Reserve signalled change in monetary policy at Jackson Hole meeting. Bloomberg Commodity Spot Index has recovered to the pre-pandemic levels at 359 crossing the highs made in January 2020.
Gold and Silver prices pared previous losses with spot gold prices at COMEX rose by more than 1 percent to $1,964 per ounce after falling for two consecutive weeks. COMEX Spot silver prices rallies by more than 2 percent to $27.50 per ounce getting additional boost form strong base metals. However, bullion prices in India failed to keep up the momentum with international peers with Gold and Silver prices at MCX ending more than 1 percent lower for the week with sharp rupee appreciation.
The spot rupee rallied by nearly 2 percent on broad dollar weakness. The Gold ETF holdings declined for the week as holdings at SPDR Gold Shares fell to 1,251.50 tonnes on Friday. The CFTC data showed that the money managers have decreased their net long positions to 11-week low by 16,935 lots in last week.
Bullion prices resumed uptrend after US Federal Chairman outlined new change in monetary policy to keep tighter job market with higher inflation. Investors turned cautious over falling bond yields which led to rise in safe haven buying in bullion. We expect gold prices to trade positive with strong support at $1,900.
The trade above $2,000 may lead prices towards $2,100 in near term. At MCX, Gold October prices have near term resistance at Rs 53,800 per 10 grams and support at Rs 50,200 per 10 gram. Silver prices at COMEX have resistance at $30 per ounce with strong support at $26 per ounce. At MCX, December Silver prices have resistance at Rs 72,000 per KG, support lies at Rs 65,000 per KG.
Base metals prices rallied for the second consecutive week as lower supply concerns, demand growth optimism and dollar weakness combined boosted prices for the week. Nickel prices at LME rallied by more than 4 percent followed by Copper, Zinc and Aluminium which gained by 2 percent for the week.
Nickel prices at LME rose to the nine-month on higher demand from China and fear of lower supply of nickel ore from Southeast Asia region over lower shipments. Copper prices rose to the two-year high at LME with prices closing above the resistance levels of $6,645 per tonne.
Copper inventories at LME fell to the lowest levels since 2005 while Copper inventories at SHFE fell by 2,180 tonnes for the week. Copper prices may continue to trade higher in medium term on expectations of lower supplies estimates from world's top miners and demand recovery expectations form US and China over positive economic data.
LME Copper prices have crossed key resistance above $6,645 per tonne on weekly chart. We expect Copper prices to trade higher with resistance at $6,800/6,950 per tonne. At MCX, Copper September contract has important resistance at Rs 535 per kg and support at Rs 515 for the coming week. MCX Nickel September has resistance at Rs 1,160 while important support lies at Rs 1,090.
The author is Senior Analyst - Commodities at HDFC Securities.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.