Base Metals Erase Gains, Oil Gains 2.7% on Weaker Dollar

RBI kept bank’s cash reserve ratio (CRR) unchanged at 6.00 percent. The central bank revised down its growth forecast for the fiscal year ending in March to 7.6 percent from the previous 8 percent and sticking to its forecast that wholesale price index inflation will ease to 7 percent at the end of the fiscal year.

Spot gold prices rose 0.6 percent today, mainly on the back of choppy market sentiments which fueled safe-haven demand for gold. Additionally, weakness in the US dollar also provided further support.

Prices touched an intra-day high of $1663/oz and were hovering around $1661/oz till 4.45 pm IST. MCX Gold December contract gained by 0.4 percent as further gains were capped due to Rupee appreciation on the domestic bourses and touched an intra-day high of Rs.26,853/10 gms till 4.45 IST today.

Rise in gold prices along with a weaker dollar led spot silver prices trade higher by around 0.9 percent till 4.45 pm IST today. Additionally, mixed sentiments in the global financial markets also acted as a supportive factor. The white metal touched an intra-day high of $32.10/oz and was trading at $31.97/oz till 4.45 pm IST.

The base metals complex erased earlier gains and traded lower on the LME till 4.45 pm IST today, with aluminium being an exception. Investors grew nervous ahead of a European Union (EU) summit scheduled tomorrow and this led choppy sentiments in the global markets. Zinc was the worst performer of the day, as the metal declined around 1.3 percent on the LME and by 0.8 percent on the MCX till 4.45 pm IST.

Nymex crude oil witnessed gains of around 2.7 percent today, taking cues from a weaker dollar. However, expected rise in US crude oil inventories capped further gains in prices. The American Petroleum Institute (API) is scheduled to release its weekly inventories tonight and crude oil inventories are expected to rise by 2 million barrels for the week ending on 21st October 2011.On the MCX, crude oil prices increased by 2.2 percent and closed at Rs.4647/bbl after touching an intra-day high of Rs.4653/bbl till 4:45pm today.

Outlook

Gold and silver is expected to trade higher today, on the back of a weaker dollar coupled with choppy sentiments in the global financial markets which will increase demand for metals. Silver is also expected to take cues from rise in gold prices.

Base metals are expected to trade with a sideways bias today, on account of mixed market sentiments ahead of EU summit tomorrow and dollar weakness.

Today, we expect crude oil to trade with a sideways bias, taking mixed cues from expected rise in US crude oil inventories, choppy market sentiments and a weaker dollar.