Commodities Outlook: Bullions and Crude Oil extend losses, Base Metals remain steady
By Sam Nair
Bullions extend losses as FED meeting approaches, slower nonfarm payrolls
Precious Metals extended losses as the greenback continued to strengthen ahead of the FED meet next in which the central bank is expected to hike interest rates. Gold is trading at 28772, down 195 or 0.67% whereas Silver is trading at 37290, down 154 or 0.41% currently.
The short-term trend continues to remain weak the dollar index trends higher driven by the tax bill and the upcoming rate hike from the FED next week. The year-end holidays are also contributing to the downside as traders close out positions before the season begins. Prices came under pressure last evening after the ADP report estimating that US employment increased 190,000 in November, higher than forecasts at 185,000 but below the October figure which was at 235,000.
On the data front today, we have unemployment claims which analysts expect to have increased slightly to 240,000 compared to 238,000 in the previous week. After breaking below the previous support at 28900, Gold is expected to decline to 29600-29400 this week whereas Silver could crash another 500-1000 points if it closed below support at 37200 today.
Base Metals recover marginally on profit booking; further downside expected
Base Metals are trading marginally higher driven by profit booking in intraday but the overall trend remains negative in the short term. Copper is trading at 427.85, up 1.35 or 0.32% whereas the rest of the metals are trading marginally in red today.
The downside threat continues to prevail in the market as traders look ahead to the trade and customs report from China scheduled in the morning tomorrow. Weaker imports for base metals or the second month could imply a stubbornly weak economy and bring renewed short-selling interest in the base metals complex. Support for Copper is at 424 below which prices may fall further lower to 420 in intraday today whereas, on the upside, a sustained close above 430 could see prices recover higher in the short term.
Crude Oil drifts lower after inventories report
Crude Oil is trending lower after the inventories report showed a larger than expected buildup in the inventories report. Crude Oil is trading at 3620, down 16 points or 0.44% whereas Natural Ga sis down nearly three percent to trade at 183.60.
The intraday bias is on the weaker side. We expect prices to decline further to recent lows of 3580 breaking which further downside is expected in the short term. The EIA reported a large draw in crude oil stocks but the increasing levels in refined products pushed traders to close out longs and shift to the selling side. We also have the oil rigs report due tomorrow which may push oil prices further lower in the short term if it shows another addition to the active rigs. Natural Gas inventories are due today with analysts expecting a smaller draw at 7 bcf compared to a draw of 33 bcf in the previous week.
(Sam Nair is the Head of Commodities Research at Celebrus Commodities Limited)