Natural gas prices may remain in pressure and may test levels of Rs 115 by coming week which will be a decent level for a positional buy.
Gold prices witnessed a sharp fall this Thursday (May 21) backed by positivity over a potential COVID-19 vaccine and news over easing of lockdowns across major economies.
Investor's confidence on riskier assets led to the fall in yellow metal prices to $1,725 levels from its recent highs $1,760 per troy ounce.
Domestically, the prices corrected to Rs 46,400 levels for 10 grams about Rs 800 below previous closing on May 21.
However, the prices bounced back to Rs 47,000 mark on May 22 as the hopes over possible vaccine was found diminishing with worries on potential job losses and its impact on the economy in the medium to long term.
Central banks lower interest rates and increasing tensions of US and China trade conflicts are holding the prices firm.
We expect the Gold prices to stay firm and recommend a buy on dips strategy in the range of Rs 46,500 levels with a stoploss around Rs 45,100 targeting Rs 47,600 in the coming week.
Silver on the other hand rallied with other industrial metals as the world reopens for industrial activities backed by positive import / export data from China and easing lockdowns across other major economies. About 51 percent of its consumption demand comes from industries, and hence the prices may stay firm in the near term. We expect the prices to trade in the range of Rs 50,000 in the near term.
Base metals witnessed correction during the last two days reducing the gains of previous trading sessions during the week, as the overall impact on global consumption still remains in question.
Copper looks to be a safer bet at the moment as it corrected from Rs 418 per kg mark to May 22's Rs 406 levels. Since the demand is expected to stay firm with limited supply, we can expect the prices to touch its previous day's range of Rs 418-425 in the coming week domestically and at LME the prices may stay above $5,500 per tonne.
Nickel prices may also stay firm as it is in short supply and hence the current price of Rs 928 can be seen as a buying opportunity targeting Rs 960 with a stoploss of Rs 915 in the coming week. Aluminium is the only base metal where we expect the bearish trend to continue as the stocks build up at LME may keep the prices in pressure. Zinc on the other hand may also recover a bit towards Rs 158 by next week considering the current stock levels at LME.
Energy prices have shown some recovery especially the crude oil prices from Rs 1,600 levels a barrel couple of weeks back to Current levels of Rs 2,450 supported by lower-than-expected inventories during the last 2 week in the US. Easing lockdowns, reduced production capacities in the US and statement from Saudi Arabia of cutting another 1 million barrels per day output by June are the major reasons for its rally. However, the demand still looks sluggish in the short term and the rally in prices may get capped by trader's sentiments. We recommend a sell in Crude Oil June contract around Rs 2,450 with a stoploss of Rs 2,550, targeting Rs 2,300-Rs 2,250 by the coming week. Natural gas prices may remain in pressure and may test levels of Rs 115 by coming week which will be a decent level for a positional buy.
(The author is Head - Commodities/Currency at Axis 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.