Commodity prices slide, except for crude oil; gold, silver decline amidst weak sentiment

Most commodities’ price extended losses except crude oil. Gold price posted its third consecutive weekly decline and for the week price closed lower by 1.59% while silver price tumbled more than 2.30% as rallied in US dollar and weak sentiment from base metals. Crude oil price settled in green amid mixed signals from OPEC and its alliance regarding production cut in the upcoming meeting. While natural gas prices plunged nearly 10% last week as expectation of weak demand outlook for next two weeks. Base metals prices extended southward direction and copper and zinc prices hit fresh swing low in the last week as improved supply and tepid demand from top metal consumer China.

Gold has come under pressure last week after Fed officials advocated more action to curb inflation, diminishing expectations the central bank’s tightening campaign has ended. Traders have raised their bets on another hike by June, which would hurt non-yielding metals. Additionally, strength in the dollar index weighed on the yellow metal. The dollar index advanced for the third straight week on the back of expectation higher interest rate stay for a longer period. Money markets are now pricing in a 40% chance that the Federal Reserve will deliver another 25-basis-point rate hike at its policy meeting next month, while expectations that the Fed will begin cutting rates later this year have been scaled back. Money managers have decreased their bullish gold bets by 14,399 net-long positions to 117,390, weekly CFTC data on futures and options showed.

Comex Silver price fell to two months low and settled lower by 2.31% in the previous week. While MCX Silver July contract closed lower by 2.85% at Rs 71,229 per 1 kg. Selloff in base metals added pressure in silver rate. Copper and Zinc prices declined more than 10% and 20% respectively in last two months. 

Gold, silver technical levels

Looking forward, we expect short-term fundamentals remain unfavorable for bullion as optimism that a US debt deal may be imminent that will raise the debt limit. Meanwhile, expectation of further interest rate hike is increased after hawkish comments from several Fed members and higher than estimated PCE price inflation data supports Fed’s hawkish stance. On the technical front, Comex spot gold price has immediate support at $1923. If the gold rate breaks this support, then price will likely to fall towards $1905/$1880 per ounce, with resistances at $1995/$2010 per ounce. MCX Gold August future having supports at Rs 59,240/58,700 and resistances at Rs 60,300/60750. Comex Silver has support at $22.60 /$21.70 per ounce and has resistances at $24.20/$25.70 per ounce. MCX Silver July future price find supports at Rs 70,080/69,300 per 1kg and face resistances at 72,450/73,600 per 1 kg for the week.

(Saumil Gandhi, Senior Analyst (Commodities), HDFC Securities. Views expressed are author’s own. Please consult your financial advisor before investing.)