Base Metals Trade Lower, Crude Oil Eyes API Data

European equities are trading on a positive note today on the back of a successful auction of Spanish bonds of 3.04 billion euros as against a target of 3 billion euros. Additionally, expectations of quantitative easing from Fed policymakers which will begin their two days meeting starting today and Group of 20 leaders summit in Mexico will focus their discussion on European debt crisis also acted as a positive factor for the markets. 

Asian markets ended on a negative note and US stock futures are trading in the green. German ZEW Economic Sentiment declined to -16.9-mark in current month from previous rise of 10.8-level in May. European ZEW Economic Sentiment declined further to  -20.1 in June compared to previous fall of 2.4-level in last month. 

Spot gold prices gained around 0.1 percent in today’s trading session. However, strength in the US Dollar Index (DX) capped further gains in gold prices. The yellow metal touched an intra-day high of $1632/oz and hovered around $1629/oz till 4:30pm IST today. On the MCX, Gold August contract increased by  0.2  percent  on account of depreciation in the Indian rupee and was trading around Rs.30,373/10 gm today. 

Taking cues from the rise in gold prices and mixed performance in the base metals pack, spot silver prices increased by 0.3 percent today. The white metal touched an intra-day high of $28.93/oz and was trading around $28.78/oz today. In the Indian markets, prices gained by 0.2  percent and hovered around Rs.55,067/kg till 4:30pm IST today.

The base metals complex traded lower today on account of rise in LME inventories coupled with strength in the DX. Copper, the leader of the base metal group declined around 0.1 percent today on the back of a rise in LME copper inventories around 1 percent which stood at 251,675 tonnes. 

In the Indian markets depreciation in the rupee lead to an upside in base metals prices. Nymex crude oil prices declined by 0.1 percent on the back of ease in supply concerns from Iran coupled with expectations of increase in supply from the Seaway pipeline by end of the year. The American Petroleum Institute (API) is scheduled to release its weekly inventories today and US crude oil inventories are expected to decline by 1.0 million barrels for the week ending on 15th June 2012. 

We expect precious metals and base metals to trade on a range bound note on expectations of quantitative easing from the Fed policymakers starting today along with a successful bond auction in Spain. While on the other hand stronger DX can add downside pressure on the prices of commodities. In the case of crude oil, prices will trade with a sideways bias as US crude oil inventories are expected to decline while expectations of increase in supply from Seaway pipeline coupled with ease in Iran nuclear talks can exert pressure on crude oil prices.