Commodity Market News- Updates for Base metals and Precius Metals

Precious Metals


Gold futures plummeted to $1357/oz as the dollar surged against major currencies after China increased its lending and deposit rates by 0.25%. Any increase in interest rate is generally seen as negative for the bullion prices and reduces its alternative investment appeal. Silver followed suit and fell to $24/oz. MCX gold and
silver futures reacted in the similar fashion and rupee appreciation had further negative impact on prices. ZEW survey for economic sentiments also slipped in Germany. Equities traded down in Europe while Asians closed mixed to higher. Day ahead, housing starts and building permits data are scheduled from the U.S. Housing starts may have declined while building permits declined in September. The effect of interest rate hike in China may prevail for some more time and thus, gold futures may trade lower. We expect precious metals to recover from current levels, as investors may re-enter at lower levels knowing the underlying strength of gold. However, actual data will also provide further direction.

Base Metals-

After trading higher for most part of the day, base metal prices are witnessing a correction and are currently trading lower with losses of anywhere between half to one percent. Indecisiveness, as indicated by volumes and open interest, among the traders is creating huge volatility in the market. Volumes till now have already crossed yesterday’s total volume and the open interest is declining after rising initially indicating lot of intraday trading. Chinese central bank raised both lending and deposit rates by 25 bps and thereby this might have sent fears of tightening and resulted in commodity prices taking a correction. Most of the Asian equity markets closed higher with the exception of Indian markets and the European equity markets continue to add weight with positive ZEW survey data. In the evening, housing data from US is due to be released and the expectation is that housing starts will decline whereas the building permits might increase. Dollar
index is currently trading higher by half a percent. Overall, the bias now remains on the lower side but positive housing data may pull back base metal prices on the higher side.

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