Base Metals Weak On Dollar Gains, Crude Oil Drops On Global Uncertainty: April 16, 2012

India’s wholesale price index (WPI) eased marginally to 6.89 percent  in March 2012 as against 6.95 percent in February 2012. Manufacturing goods inflation declined to 4.87 percent in March from 5.75 percent a month ago.

The country’s food inflation rose to 9.94 percent in March with respect to 6.07 percent in previous month. Fuel inflation eased to 10.41 percent in March as compared to 12.89 percent a month earlier.  

Spot gold prices came under pressure in today’s trade on the back of strength in the US Dollar Index coupled with mixed sentiments in global markets due to rising concerns over eurozone debt crisis.

The yellow metal touched an intra-day low of $1640.64/oz and was trading at $1647.21/oz till 4.30 pm IST. On the MCX, Gold June contract dropped around 0.2 percent and further fall was cushioned on account of a weaker rupee. The yellow metal touched an intraday low of Rs. 28,441/10 gms and was hovering around Rs. 28,537/10 gms till 4.30 pm IST today.

Spot silver prices traded lower by 0.4 percent till 4.30 pm IST today,  taking cues from fall in gold prices coupled with downside in base  metals pack. The white metal touched an intra-day low of $31.16/oz till 4.30 pm IST. However, MCX Silver May contract witnessed gains of around 0.1 percent till 4.30 pm IST on account of depreciation in the Indian rupee.

Strength in the US Dollar Index coupled with mixed sentiments in  the global markets led base metals to trade lower on the LME today. Nickel is a top loser of the day, as the metal dropped around 1.3  percent on the LME and almost 1 percent on the MCX till 4.30pm IST today. LME inventories of nickel rose 1 percent to 99,330 tonnes today and this acted as a negative factor for the metal prices.

However, rupee depreciation cushioned further losses on the  domestic platform. Nymex crude oil prices declined 0.3 today on the back of demand  concerns from China coupled with rising uncertainty over eurozone debt tensions.

Additionally, a stronger Dollar Index also exerted downside pressure on oil prices. Crude oil touched an intra-day low of $101.88/bbl and hovered around $102.55/bbl today till 4:30pm IST. On the MCX, oil prices declined by 0.3 percent and was trading at Rs. 5300/bbl after touching an intra-day low of Rs. 5267/bbl till 4:30pm IST today.

Rising uncertainty with respect to global economic growth and concerns with respect to Europe’s debt worries will lead to mixed sentiments in the global markets today. On account of this, we expect the Dollar Index to remain strong.  

Taking cues from this, we expect precious metals and base metals to trade with a negative bias in the evening session. Crude oil prices are expected to trade lower on the back of strength in the dollar index coupled with choppy market sentiments.

US retail sales data is to be release at 6.00 pm IST and if the data comes on a positive note then this will provide upside support to the commodity prices.