Sunilkumar Katke
Precious metals
Gold prices have started gaining momentum after a stall at around $1,700-mark per troy ounce on mixed cues of easing lockdown across major economies, stabilising equity markets on one hand versus the lower long term yields and long term impact of pandemic on the global economies.
However, the prices have now started moving up as US and China trade concerns are fueling the yellow metal prices backed by safe haven. Even the stimulus packages on offer are bound to come at the cost of currency devaluation, the same is also bringing a lot of demand from hedge funds as a safer bet helping the prices move up to $1,735 mark as of now.
Domestically, we have seen gold prices moving up from Rs 45,000 mark per 10 grams a couple of weeks ago to current levels of Rs 46,850. We are expecting the prices of yellow metal to stay firm in the near term with a target range of $1,800 at Comex and about Rs 49,000 at MCX by June 2020. We advise a buy around Rs 46,800 levels targeting Rs 47,600 by the next week with a stoploss around Rs 46,400 mark.
Silver, on the other hand, is also gaining momentum considering the improving import/export data of China and easing lockdowns across other major economies as 51 percent of its consumption demand comes from industries.
The prices at Comex improved from $15 levels 2-week back to current $16.2 mark and domestically from Rs 41,000 per kg to current levels of Rs 45,300 at MCX.
We are not very bullish on silver as the long term effects of pandemic on global economies will weigh on the white metal and see the prices in the range of Rs 41,000 to Rs 46,000 for some time. we advise a sell on rise strategy for silver around Rs 46,000 with stoploss around Rs 46,500 targeting Rs 43,500 from a 1 week point of view.
Base Metals
Base metals like copper may see some improvements as the stocks are cut to cut with hopes of improving demand from China and other major economies as they come out of lockdowns slowly. The prices may test Rs 415 domestically from current levels of Rs 402.
The likes of Aluminium and Zinc may see some more corrections on account of inventory build up at LME backed by lack of demand. Nickel may also see a pullback in prices up to Rs 950 levels from its current level of Rs 910 backed by demand from major Asian economies in the near term.
Energy
Energy prices have shown some recovery especially the Crude Oil prices from Rs. 1600 levels couple of weeks back to Current levels of Rs 2,100 supported by lower than expected inventories in the US this week, easing lockdowns, reduced production capacities in the US and statement from Saudi Arabia of cutting another 1 MB per day output by June.
However, the demand still looks sluggish in the short term and the rally in prices may get capped by traders sentiments. We recommend a sell in Crude Oil June contract around Rs 2,200 with a stoploss of Rs 2,310 targeting Rs 2,000-Rs 1,900 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.
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(The author is Head of Commodities and Currency, Axis Securities Limited)
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