Crude may witness volatile trade amid positioning ahead of contract expiration and weekly inventory report.
Comex gold was on July 21 trading in a narrow range near $1820/oz after gaining a 0.4 percent the previous day. Gold bounced back after taking support near $ 1,790, however, price is yet to go pats the 2011 high set earlier this month. Unless we see a break above that level, gold will continue to trade in a narrow range.
Gold is range-bound as the support from weaker US dollar, ETF inflows, geopolitical tensions, hopes of additional stimulus measures and rising virus cases is countered by signs of progress in vaccine development.
The US dollar index traded near six-week low, weighed down by reduced safe-haven buying and concerns about the US economy amid rising virus cases. Euro has also benefitted from signs of progress on the EU recovery fund.
ETF investors have continued to increase their exposure to gold amid challenges to global economy.
Gold holdings with SPDR ETF rose by 4.96 tonne to 1211.856 tonne, the highest since April 2013. Increased geopolitical tensions have also enhanced gold’s safe haven appeal.
Gold may witness choppy trade as market players assess virus and geopolitical risks but general bias will be on the upside due to a weaker dollar and strong investor buying.
Comex silver traded higher near $20.39/oz after a 2.2 percent gain on July 20. Silver hit a high of $ 20.41 on July 21, the highest since August 2016. Silver has rallied sharply in last few days on the back of stable gold prices and firmness in most industrial metals.
Weakness in the dollar has benefitted commodities. Silver’s outperformance is also evident from a drop in gold silver ratio. The ratio currently stands near 91 levels, lowest since February. Also supporting silver is a strong investor interest. Silver holdings with iShares ETF rose by 118.78 tonnes to a fresh high of 16,379.08 tonne.
Supply concerns remain high amid rising virus cases in Mexico and Latin America. After days of consolidation $19.5, silver has given a break past the $20 and we may see some extended gains amid general upbeat outlook for gold.
NYMEX crude was trading mixed near $ 41 per barrel after a 0.4 percent gain the previous day. The listless trade is amid choppiness in equity markets as market players weigh hopes of recovery, stimulus measures and the progress in vaccine development against rising virus cases, growing geopolitical tensions and uncertain growth outlook.
US DJIA index ended with negligible gain on July 20 after a minor decline the previous day. The dollar index at near six-week low amid reduced safe-haven buying and concerns about rising virus cases in the US.
Though infections are rising across the world, market players are worried about the spike in the US that has forced states to re-impose some restrictions.
Mixed economic data from major economies point to challenges facing recovery but market players are hoping that continuing stimulus measures will help boost growth.
On the supply side, crude is supported by expectations of another decline in US stocks and drop in rigs count to 2009 lows.
However, weighing on the price is OPEC’s stance to reduce the pace of production cuts from August and steady US crude production.
Crude may witness choppy trade amid positioning ahead of contract expiration and weekly inventory report but general bias may be on the downside owing to rising challenges to demand recovery.
(The author is VP- Head Commodity Research at Kotak Securities.)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.