Base Metals to Trade Sideways on Euro Zone Worries

Except lead, all other base metals traded lower on the LME in yesterday’s trading session as uncertainty over Euro Zone debt crisis still persists and this acted as a negative factor for metals.

However, weakness in the US dollar resisted sharp decline on Thursday. Appreciation in the Indian Rupee (INR) led further decline on the domestic markets yesterday.

Lead

Lead was the only metal to witness gains on the LME as well as on the MCX in yesterday’s trading session. Factors that supported the metal prices are – continuously fall in LME lead inventories coupled with a weaker dollar. On a weekly basis, the metal inventories declined sharply by 2.7 percent to 371,950 tonnes on Thursday.

Lead touched an intra-day high of $2167/tonne and ended its trading session at $2162/tonne yesterday. MCX Lead prices hit an intra-day high of Rs105.4/kg and closed at the level of 104.95/kg on Thursday.

Outlook

We expect base metals to trade with a sideways bias today taking mixed cues from a weaker dollar, upbeat sentiments in the global markets and concerns over Euro Zone debt worries. Any negative news or developments from the Euro Zone front will act as negative factor for prices.

Crude Oil to Trade With Positive Bias on Iran Worries

Nymex crude oil prices increased sharply by 1.5 percent on Thursday, on the back of supply concerns from Iran, favorable unemployment claims data from the US which held at a fouryear low and improved German business confidence data.

Additionally, a weaker dollar also acted as a positive factor for the commodity.

Oil prices touched an intra-day high of $108.74/bbl and closed at $107.8/bbl yesterday. On the MCX, prices increased by 0.7 percent and closed at Rs.5280/bbl after touching an intra-day high of Rs.5293/bbl on Thursday.

EIA Inventories Data

As per the US Energy Department (EIA) report released yesterday, US crude oil inventories increased by 1.63 million barrels to 340.71 million barrels for the week ending on 17th February, 2012. Gasoline stocks fell by 649,000 barrels to 231.53 million barrels and whereas distillate stockpiles also declined by 208,000 barrels to 143.51 million barrels for the last week.

Outlook

We expect crude oil prices to trade with a positive bias today on the back of supply worries from Iran, a weaker dollar and upbeat sentiments in the global markets.

Gold and Silver to Trade Higher on Dollar Weakness

Weakness in the US dollar helped gold prices to gain around 0.2 percent on Thursday. In addition to this, rise in crude oil prices also boosted inflation-hedge demand for gold which also acted as a positive factor for prices yesterday.

The yellow metal hit a three-month high of $1787/oz and closed at the level of $1779/ on Thursday. MCX Gold prices increased almost 1 percent in yesterday’s trading session and hit an intraday high of Rs28,944/10 gms.

Silver

Taking cues from a weaker dollar coupled with rise in gold prices, spot silver prices rose sharply by 3 percent on Thursday. The white metal hit an intra-day high of $35.59/oz and closed at $35.4/oz yesterday. On the MCX, Silver March contract gained sharply by 2.5 percent on Thursday and touched an intra-day high of Rs58,784/kg.

Outlook

Gold and silver are expected to trade higher today on account of dollar weakness, as a weaker dollar makes dollar-denominated commodities look attractive for holders of other currencies.

However, concerns with respect to Euro Zone debt crisis still persist and any negative news or developments from the Euro Zone front will lead to reversal in the markets.