COMEX gold trades in a narrow range near USD 1,890/oz after a 0.9 percent decline on October 7. Gold prices came under pressure after failing to sustain above the USD 1,920/oz level but has so far managed to hold near the USD 1,880/oz level. We may see price remaining choppy near USD 1900/oz unless there is more clarity on US stimulus front.
In last two days we have seen equity markets and US dollar witnessing mixed trade amid wavering stance of President Trump in relation to US stimulus. FOMC minutes also failed to give any fresh cues. Fed maintained that US economy was recovering faster than expected but without additional fiscal stimulus the recovery may slow down more than anticipated. Some Fed officials discussed possibility of boosting asset purchases however; current focus is on fiscal stimulus, as reported by Reuters.
Gold ETF investors also moved to sidelines awaiting more clarity on price direction. Gold holdings with SPDR ETF were unchanged at 1271.516 tonnes. However, weighing on gold price is weaker consumer demand as is evident from lower Indian imports.
Gold may witness choppy trade reflecting choppiness in US dollar and equity markets as more clarity is awaited on US stimulus. However, we may see buying interest emerging at lower levels as concerns about health of US economy may keep US dollar pressurized.
Base metals on LME trade mix in early trades today after most ended on a higher note yesterday. On positive note lending support to the prices is upbeat risk appetite as is evident from gains across equity indices amid growing hopes of more US stimulus. Prices may further seek support from recent retreat in US Dollar Index.
US Dollar trades little changed in early trades today after yesterday’s modest decline. The currency has come under pressure amid decrease in safe haven demand tracking upbeat risk appetite. The gains may however be capped amid surging virus cases globally and lingering US-China tensions.
On virus front, global virus cases continue to rise with fears growing over second wave of infections across European nations, which in turn is prompting fears of re-imposition of lockdown measures thereby threatening to derail the nascent recovery in global health.
On fundamental front, copper prices may seek support from falling stocks at SHFE warehouses along with worries over possible supply disruption due to threat of strike at one of Chilean Copper mine. However last week’s jump in inventories at LME warehouses and signs of easing tightness as is evident from widening contango between LME Cash to three-month may cap the upside.
In other metals, Aluminum prices may seek support from declining stocks at both LME and SHFE warehouses, along with narrowing contango between LME Cash to three-month signaling tightness in physical market. In case of Lead, Zinc and Nickel prices may seek support from declining stocks at SHFE however higher stocks at LME and signs of ample supplies in physical market may cap the upside.
The metals pack may note choppy movement today amid mixed cues however overall bias may be positive amid upbeat risk appetite and weakness in US Dollar Index. Further cues may come in from economic data from US along with meeting minutes by ECB and BoE and its impact on US Dollar.
The author is VP- Head Commodity Research at Kotak Securities
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