Base Metals Fall On Rise In LME inventory, Gold Falls Marginally

European Equities are trading on positive note on expectation that China might take measures to boost the economy while strength in Italian bonds also led upbeat market sentiments. Asian markets ended on a firm note while U.S stock futures are trading on a flat note.

German Import Prices declined further by 0.7 percent in last month as against previous decline by 0.5 percent in April. British Bankers' Association (BBA) Mortgage Approvals was at 30,200 in May as against previous rise of 32,100 a month ago. Confederation of British Industry (CBI) Realized Sales rose by 21 points to 42-level in current month from previous mark of 21 in May.  

Spot gold prices declined around 0.3 percent today on the back of strength in the US Dollar Index (DX). The yellow metal touched an intra-day low of $1564/oz and hovered around $1566/oz till 4:30pm IST. On the domestic front, prices traded in range-bound manner and gold is now trading around Rs.29,939/10 gm till 4:30pm IST. Weare tracking bearishness in base metals prices along with a fall in gold prices. Spot silver also declined more than 1 percent today. 

Additionally, strength in the DX also exerted downside pressure on silver prices. The white metal touched an intra-day low of $26.72/oz and was trading around $26.78/oz today. On the MCX, Silver July contract, declined around 0.4 percent and was trading at Rs.52,728/kg after touching an intra-day low of Rs.52,630/kg till 4:30pm IST today.

The base metals pack traded lower today on account of rise in LME inventories along with strength in the DX. Copper, the main indicator of the base metals group declined around 0.3 percent today on the back of rise in LME copper inventories by 0.6 percent and stood at 254,875 tonnes. 

On the domestic front, prices gained by 0.1 percent as a result of depreciation in the Indian rupee. Nymex crude oil prices declined around 0.2 percent taking cues from escalating eurozone debt crisis which will curb demand for fuel coupled with strength in the DX. However, expectations of a decline in US crude oil inventories cushioned further fall in crude oil prices. 

The US Energy Department (EIA) is scheduled to release its weekly inventories report today at 8:00pm IST and US crude oil inventories is expected to decline by 0.5 million barrels for the week ending on 22nd June 2012. Gasoline stocks are expected to rise by 0.8 million barrels whereas distillate inventories are also expected to gain by 1.2 million barrels for the same period.

In today’s session, we expect precious metals, base metals and crude oil prices to trade with a sideways bias on account of rise in risk aversion in global markets coupled with stronger DX. However, US economic data is expected to come on a positive note which will lead to upside in the prices of the commodities. In case of crude oil, upside in prices will be supported on the back of expectations of decline in US crude oil inventories.