Tapan Patel
Commodity prices traded positive as crude oil and base metals, excluding zinc and lead, ended with gains on demand growth optimism.
Bullion prices kept the risk premium high, keeping a firm trading range supported by the decline in the dollar index. The dollar index shed safe-haven gains on improved economic data from the US and China.
Gold prices continued to trade positive for the fourth week in a row, with Comex spot gold ending at $1,772 per ounce with minor gains. Gold prices witnessed strong buying on growing market uncertainty over rising virus cases in the US and the other parts of the world.
Comex spot gold prices later declined, facing resistance at $1,790 per ounce as better-than-expected economic data from the US and China weighed on the prices.
The Gold ETF holdings continue to hit highs. SPDR gold holdings rose to 1,191.47 tonnes on July 3.
Gold prices are struggling to break key resistance range at $1,800 and have formed a 'doji' candlestick on the weekly chart. The recent positive data from Euro zone, the US and China may continue to weigh on prices in the short term.
We expect gold to trade in the current range, with near-term resistance at $1,790 per ounce and support at $1,760/$1,740 per ounce.
At MCX, August gold prices have a near-term resistance at Rs 48,700 per 10 grams and support at Rs 47,500 per 10 grams.
Crude oil ended last week with the solid gains, with benchmark WTI prices rising by more than 5 percent to above $40 a barrel for the week.
Crude hit a four-month high on positive global cues with breakout above $40 per barrel. But Prices were struggling to sustain above $40 as growing virus cases raised concerns over fuel-demand recovery. The bullish weekly inventory data and positive economic data from US and China boosted investment sentiments on demand recovery hopes.
The total crude oil rigs fell by 3 to 185 to the lowest levels since June 2009 as per data published by Baker Hughes. We expect oil prices to continue to trade in the upper range of $37 to $43 per barrel for the coming week, as investors will start speculating over OPEC plus nations' decision on whether to extend or refrain from the output cut extension.
At MCX, crude oil July future contract has important resistance at Rs 3,160 per barrel and support at Rs 2,790 for the current week.
Base metals traded mixed with copper, nickel and aluminium prices ending in the green. Lead and zinc traded lower. Most of the base metals witnessed buying as reopening of economic activities has lifted some demand for industrial metals.
Nickel gained the most during the week, with rally in stainless steel prices in China as many of the producers will shut for the maintenance activity.
Copper prices managed to end positive after witnessing some correction at higher levels. The worries over rise in virus cases and jump in inventories pressured copper prices in the second half of the week. Copper prices traded above $6,000 per tonne at LME on supportive economic data from top consumers.
Copper inventories at SHFE rose by 14,347 tonnes during the week. We expect prices to continue to trade higher in current week. LME copper has an important resistance at $6,120 per tonne with support at $5,690 per tonne.
MCX July copper futures have a near-term resistance at Rs 465 per kg with support at Rs 456/452 per kg for short term. A sustainable trade above Rs 465 may lead copper prices towards Rs 480 levels.
(The author is Senior Analyst-Commodities at HDFC Securities.)
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