ARKET RECAP
Base metals ended on a mixed note on Wednesday, as markets would now want to wait and watch as to how this new stimulus plan helps to rescue the weakening economic situation. The US has struck a deal on $789bn stimulus plan but the effect of this plan could take some time. Also, there is not much clarity over the source of these funds and whether this would lead to a definite solution of the worsening economic situation.
LME inventories for base metals stand at a fresh 15-year high and this indicates that the demand situation is worsening. However, prospects of improvement in demand stands as hope but this relies on how China utilizes and implements its stimulus plan. Copper prices remained range bound on the LME yesterday but a steady rise in LME inventory pulled the metal lower. Aluminum inventories jumped a whopping 12,875 tonnes, Nickel inventories gained 864 tonnes and Zinc jumped 1,050 tonnes.
On the macroeconomic front, the US released trade balance data yesterday and this data showed slight improvement as against the previous month. Announcement of the US economic stimulus plan could not give a boost to base metal prices as uncertainty over the source of funds combined with the slow impact could not provide a sentimental impact on prices.
OUTLOOK
Rising inventories amid an economic recession that is expected to continue over this year’s raises concern over prices. However, commodity investment has better prospects than investment in equities as investors are putting their money in tangible assets. We are of the view that the commodities market could witness better performance as prices could receive support as commodities look attractive as an investment avenue as against equities.
We believe that base metal prices could remain range bound in the short-term. Prices may not rise sharply but at the same time will receive support from increased investment and trading in commodities.
On the macroeconomic front, the US is expected to announce data on initial claims and retail sales today. If the data is on the negative side then it could lead to negative sentiments in base metal prices.
Copper
Copper prices closed lower during yesterday’s trading sessions with immediate support for MCX Feb contract is seen at Rs.163.40. Further below, crucial support is seen at 160.50 levels.
Whereas resistance is seen at Rs.169.40 levels & further upwards at Rs. 172.50.
Zinc
Zinc prices also closed lower during yesterday’s trading session with immediate support seen at Rs.54.10 levels for MCX Feb contract whereas crucial support is seen at Rs.53.95 level. Short-term resistance is seen at Rs.56.80 whereas major resistance is seen at Rs 57.40.
Courtesy: Angel Commodities
