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Daily Metal and Energy Outlook 21 May 2019

BULLION – Bullion counter may trade on weaker bias as gold eased on Tuesday after touching a more than two-week low in the previous session, as strong dollar diminished bullion safe-haven appeal amid heightening Sino-U.S. trade tensions. The dollar held near a 2-1/2-week high on Tuesday, supported by higher U.S.-yields and as intensifying trade frictions between the United States and China boosted appetite for the safe-haven greenback. Worries that the United States and China were digging in for a longer, costlier trade war weighed on financial markets on Monday as Beijing accused Washington of harboring extravagant expectations for a deal to end their dispute. Gold, which is generally considered a safe-haven asset, has shrugged most news of escalating political tensions, much to the bulls dismay. Elsewhere, Russia raised gold holdings by 15.15 tonnes to 2,183.52 tonnes in April, data from the International Monetary Fund (IMF) showed on Monday. Russia gold reserves stood at 70.2 million troy ounces as of the start of May, the country central bank said on Monday.

ENERGY- Crude oil may trade with upside bias as oil prices edged up on Tuesday on escalating tensions between the United States and Iran and on signs that producer club OPEC will continue withholding supply this year. However, gains were checked by concerns that a prolonged Sino-U.S. trade war could lead to a global economic slowdown. U.S. President Donald Trump on Monday threatened Iran with “great force” if it attacked U.S. interests in the Middle East. This came after a rocket attack in Iraq’s capital Baghdad, which Washington suspects to have been organized by militia with ties to Iran. The tension comes amid an already tight market as the Organization of the Petroleum Exporting Countries (OPEC), Russia and other non-OPEC producers have been withholding supply since the start of the year to prop up prices. A meeting has been scheduled for June 25-26 to discuss the policy, but the cartel is now considering moving the event to July 3-4, according to OPEC sources on Monday, with its de-facto leader Saudi Arabia signalling a willingness to continue withholding output. U.S. natural gas futures climbed to a five-week high due to a steep drop in production and on forecasts power generators would burn more gas than previously expected to produce electricity to meet higher air conditioning demand over the next two weeks

BASE METAL – Base metals may remain with witness some bounce back at lower levels London copper prices rose in early Asian trade on Tuesday after the United States temporarily eased some trade restrictions on Chinese telecoms giant Huawei. On Thursday, the U.S. government had added Huawei and 68 entities to an export blacklist that makes it nearly impossible for the Chinese company to purchase goods made in the United States, escalating Sino-U.S. trade tensions and weighing on prices for industrial metals. The global world refined copper market showed a 74,000 tonnes surplus in February, compared with a 33,000 tonnes deficit in January, the International Copper Study Group (ICSG) said in its latest monthly bulletin.

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