Commodity prices have corrected on a strong US dollar as the American job market strengthens and prompts the Federal Reserve towards easing its asset-purchase programme. It may also push the American central bank towards a rate hike sooner than expected.
The booming US economy has led to a fall in most dollar-denominated commodities, with the dollar index trading at a three-week high. On August 13, gold slipped below the $1,700-mark at Comex but has since bounced back and is trading at around $1,790 a troy ounce.
In the domestic market, gold is hovering around Rs 47,300 for 10 grams, with slight bounce back in prices as the core inflation data was lower than expected, pulling back the US yields.
A stronger US data and the Fed’s stance may cap the prices in the short term and again push the yellow metal below $1,700. We recommend a sell in gold around Rs 47,500 with a stoploss at Rs 48,000 targeting Rs 45,500 in a couple of weeks.
Silver, on the other hand, also corrected with the metal trading below $23.7 a troy ounce at Comex and around Rs 63,300 a kg at MCX.
Silver is being pushed from both sides. On one hand, the US economic recovery is pressuring the safe-haven appeal of precious metals and on the other, its industrial applications demand may improve soon. We recommend a sell in silver around Rs 63,500 at MCX with stoploss at Rs 65,000, targeting Rs 60,000 in the coming two weeks.
Base metals corrected initially on account of improving dollar and poor consumption numbers from China for July 2021. However, the overall view for base metals remains buy on dips in the mid to long term, considering the shortage in supply and improved demand forecast from major economies.
With the Fed working on major infrastructure spending plans, the base metals may again move near their all-time high post a decent correction we witnessed due to Chinese steps towards curbing the price rise.
Even a slight slowdown in manufacturing activities on account of the threat of the Delta variant of coronavirus pressured the prices recently.
Copper prices in the domestic market are at Rs 705-710 a kg. A stronger dollar may pressure copper prices towards Rs 680-690 in the coming two weeks. Hence one can sell with a stoploss of Rs 710.
However, around Rs 680, copper trend reversal can be seen and can go long again targeting Rs 740-750 in the coming two months.
Aluminium is another commodity in demand due to a shortage in supply and the prices may go to Rs 215 a kg. It can be bought for around Rs 206 with the stoploss at Rs 202.
On the energy sector front, crude oil bounced back after a massive correction backed by improved supply and threats to demand due to the spread of the Delta variant in many countries, including China.
WTI crude was trading close to $67 a barrel may see some pressure in the near term and may slide towards $65, which can be a good buying range with a medium-term view. We expect the crude prices to trade in a range of $65-75 considering mixed fundamentals on supply and demand.
Natural gas, on the other hand, is trading above the Rs 285-mark at all-time high prices across Europe and decent export numbers from the US as a result of warmer weather that has increased cooling demand. However, since the prices have already discounted the fundamentals, one can wait for an opportunity to go short around Rs 300, targeting Rs 260 again with a stoploss of Rs 320 in the coming two to three weeks.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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