Crude oil, gold prices to remain rangebound with bearish bias in short-term: HDFC Securities

The CFTC data showed that the money managers have increased their net long positions to three week high by 3,608 lots in last week.

Commodity prices traded lower for the second consecutive week with most ending in the red last week. Energy basket witnessed heavy sell-off with NYMEX Natural gas prices falling by more than 12 percent while WTI crude oil shed more than 6 percent for the week. Base metals traded down on weak global cues while copper remained an exception among the base metals ending marginally up for the week.

Bullion prices kept narrow trading range during the week with gold prices ending marginally up while silver spot prices ended over half a percent down on weak base metals. Commodity prices traded under pressure on dollar recovery which ended up by 0.66 percent for the week against the major currencies.

Gold and silver prices traded mixed in continuation of corrective phase with spot gold prices at COMEX witnessing rangebound trading near $1,940 per ounce. COMEX spot silver prices traded under pressure with prices falling by 0.60 percent on a stronger dollar and weak base metals. Bullion prices in India kept downside limited on sharp rupee appreciation. The spot rupee rose by 0.54 percent during the week against the dollar. The Gold ETF holdings declined for the second week as holdings at SPDR Gold Shares fell to 1,248 tonnes on Friday. The CFTC data showed that the money managers have increased their net long positions to three-week high by 3,608 lots last week.

Gold prices managed to hold weekly gains on dollar fluctuation and slower economic growth amid rising virus cases across the globe. The dollar recovered against major currencies amid new uncertainties over Brexit withdrawal plan and US-China tensions. The global markets will await for US FOMC meeting this week expecting fresh triggers after FED Chair Jerome Powell unveiled new changes at previous meeting. We expect bullion prices to trade in the current range with a bearish bias for the short-term.

COMEX spot gold has strong support at $1,890 per ounce and resistance at $1,970 per ounce. At MCX, gold October prices have near-term resistance at Rs 52,200 per 10 grams and support at Rs 50,400 per 10 grams. Silver prices at COMEX have resistance at $28 per ounce with strong support at $25 per ounce. At MCX, December silver prices have resistance at Rs 70,300 per kg, support lies at Rs 65,000 per kg.

Base metals prices witnessed selling for the second consecutive week with lead prices falling the most followed by nickel. Copper prices managed to end in the green despite selling in industrial metals. The stronger dollar, US-China tensions and Bexit uncertainty weigh on industrial metals. LME copper gained for the second week at $6,739 per tonne on lower supplies.

Copper prices continued bullish stance on decline in LME inventories and higher demand prospects on China credit growth. Copper premium at Shanghai fell to $62 per tonne to the lowest since March which signalled tight spot market. LME Copper prices have sustained above the key resistance above $6,645 per tonne on the weekly chart. We expect copper prices to continue the bullish trend with resistance at $6,950 per tonne. At MCX, copper September contract has important resistance at Rs 535 and support at Rs 515 this week

Crude oil prices fell by more than 6 percent at NYMEX with benchmark NYMEX WTI crude oil prices falling to below $38 per barrel for the week. Crude oil prices declined on worries over demand recovery and ample supplies. Crude oil prices traded under pressure on fear of storage overhang as crude oil traders signed up for supertankers for long charters. The CFTC data showed that the money managers have cut their net long positions to 20-week low by 57,391 lots last week. Crude oil prices have near term support at $37 per barrel. We expect prices to trade sideways to down in coming week with support at $37/35 per barrel and resistance at $40 per barrel.

(The author is Senior Analyst - Commodities at HDFC Securities.)

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