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CAPITALSTARS – MCX COMMODITY MORNING MARKET NEWS UPDATES – 5 FEB 2019

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BULLION – MCX Gold and Silver may note choppy trade in line with international market but general bias may be on the upside. COMEX gold trades mixed trade near $1315/oz after a 0.2% decline yesterday. Gold has come under some selling pressure after testing the highest level since April 2018. Stability in US dollar, firmness in US equity market and ETF outflows has put pressure on gold price. Higher price is also expected to dent demand from India while Chinese buying may subside with end of Lunar New year. The US dollar index trades little changed near 95.8 levels after 0.3% gain yesterday. The US dollar remains supported by concerns about health of European economies and rise in bond yields post non-farm payrolls data. However, weighing on US dollar is general mixed economic data and Feds dovish stance on monetary policy. US equity markets are trading firm supported by Feds patient rate hike stance. Reports that Fed Chairman Jerome Powell met President Donald Trump at the White House for dinner Monday to discuss recent economic developments also shows willingness to work together to support the economy. However, market players are still awaiting more clarity on US-China trade deal, Brexit and US government funding. US-China officials will meet again in mid-February to discuss trade issues. US President Donald Trump was reported stating that trade talks with China are “doing very well. The US faces another government shutdown unless a deal is reached by Feb.15. ETF outflows also show some profit taking by investors. Gold holdings with SPDR ETF fell by 4.1 tonnes to 813.287 tonnes.

ENERGY- Crude Oil- MCX Crude may note mixed trade in line with international market but buy on dips is suggested. NYMEX crude trades higher but in a narrow range above $54 per barrel after a 1.3% decline yesterday. Crude earlier yesterday hit a high of $55.75/bbl, the highest level since November 2018, however failure to sustain above $55/bbl led to some correction. Crudes decline was led by disappointing US factory orders data, expectations of another increase in US crude oil stocks, waning cold in US and reports that Russia was slow in cutting output. However, supporting crude price is continuing strength in US equity market amid Feds patient stance, supply concerns relating to Venezuela amid US sanctions, OPECs adherence to production cut deal and sharp drop in US crude oil rig count. Crude has rallied sharply in last few days and with lack of fresh positive triggers we are likely to see bouts of profit taking. The overall bias however is on the upside given OPECs production cuts and general strength in US markets. Focus today will be on European and US economic data, President Trump’s State of the Union address and development relating to US-China trade and US funding discussions.

Natural Gas- MCX Natural gas may trade with a downward bias tracking cues from international exchange. NYMEX natural gas trades marginally higher near $2.66/mmBtu after a 2.7% slide in previous session. Weighing on gas price is forecast of warmer weather in parts of US which will keep a check on heating demand. Also weighing on price is higher US gas production and rise in natural gas rig count. However, the sharp slide in gas price has narrowed the gap between coal and gas price and this will increase demand from power sector. Meanwhile, weekly inventory report is expected to note a sharp decline in gas stocks owing to recent cold snap. Natural gas has fallen sharply in last few days and while sentiment remains weak we could see some short covering ahead of inventory report hence one must wait for higher levels to create fresh shorts.

BASE METAL – Base metals on LME trade mixed today after ending on a higher note yesterday. LME Nickel was the best performer with 4.7% gains followed by 1.9% jump in Aluminium prices. In other metals, Zinc and Copper ended 0.9% and 0.5% higher respectively while Lead closed essentially unchanged.

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