Gold, Crude Oil and Base Metals - June 19, 2023 - HDFC Securities

By Mr. Saumil Gandhi, Senior Analyst - Commodities, HDFC Securities.

Gold prices declined on Monday, with the spot gold price at Comex trading down by 0.09% at $1955 per ounce. Gold August future contract at MCX trading lower by 0.08% at Rs 59305 per 10 grams by noon.

The precious metals have resumed trading on the negative side as investor sentiment got knocked after hawkish signals from the Federal Reserve and the European Central Bank last week. The Federal Reserve and the ECB will keep raising interest rates further to tame inflation, which is a negative for non-yielding metals. Meanwhile, the dollar index recovered from a five-week low and is trading at 101.96, up by 0.12% against Friday's close, which also weighed on gold prices.

Going forward, this week, market participants will closely monitor FED Chair Jay Powell's testimony, US jobless claims, and consumer confidence data. On the technical front, Comex spot gold prices were able to close above the critical support level of $1935/oz, which signals that the price is likely to increase further. Comex spot gold has support at $1925/oz and resistance at $1984/oz. The MCX Gold August future has resistance at Rs 60170 and support at Rs 58900.

Crude oil prices edged lower on Monday, with the benchmark NYMEX WTI crude oil trading down by 0.20% at $71.75 per barrel. Crude oil prices dropped as investors fretted that China's plans to support the economy waned after no new announcement. A state council meeting in Beijing on Friday ended with no new measures to revive the world's largest crude importer. Meanwhile, money managers have turned bearish on crude oil again, with short positions in US crude futures and options jumping to the highest in three months.

We expect crude oil prices to continue to trade in a broader range with a negative bias based on gloomy fundamentals. On the technical front, NYMEX WTI crude oil has immediate resistance at $74.70. Until the price trades below this level, one should avoid buying. Area around $66.80 acts as strong support for the week. MCX Crude Oil July contract resistance is at Rs 6070, and on the flip side, Rs 5620 acts as support.

Most of the base metals have outperformed during the previous week on the back of supportive Chinese cues and a softer US dollar. China has plans to stimulate the economy in order to boost it. In the previous week, the Chinese central bank had already lowered its key policy rate.

We believe Chinese infrastructure expenditure and regulation changes could encourage the real estate market, which could help base metal consumption. Additionally, better-than-expected US retail sales data boosted investor sentiment.

We expect the short-term outlook to remain moderately bullish for base metals. MCX Copper June Futures have a strong supply zone around 750-755 levels, and on the flip side, support is expected at 717-712 levels, while the MCX Zinc June contract is expected to trade within the range of 226 to 216.