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Daily Metal and Energy Outlook 24 May 2019

BULLION Bullion counter may trade with upside bias as gold prices held steady on Friday after rising above $1,280 in the previous session as weaker U.S. data pushed back the dollar and reignited hopes of a rate cut by the Federal Reserve this year. The U.S. dollar retreated after hitting its highest level in two years as weaker domestic data and the potential economic fallout from the trade war with China increased expectations for an interest-rate cut this year. Sales of new U.S. single-family homes fell from near an 11-1/2-year high in April as prices rebounded and manufacturing activity hit its lowest level in almost a decade in May, suggesting a sharp slowdown in economic growth was underway. The U.S. military said it sent two Navy ships through the Taiwan Strait on Wednesday, its latest transit through the sensitive waterway, angering China at a time of tense relations between the world two biggest economies. Bullion is often seen as a safe-haven investment in times of political or economic uncertainty.

ENERGY Crude oil may witness some short covering at lower levels as oil markets stabilized on Friday amid OPEC supply cuts and tensions in the Middle East, after posting their steepest falls since the start of the year earlier in the week on the back of a global economic slowdown and swelling fuel inventories. The Organization of the Petroleum Exporting Countries (OPEC) has led supply cuts since the start of the year aimed at tightening the market and propping up prices. Increasing (oil) inventories and slumping U.S. manufacturing activity exacerbated trade related concerns about global demand. U.S. natural gas futures rose on Thursday on a smaller than expected storage build and forecasts for warmer weather and higher cooling demand.

BASE METAL Base metals may trade with slightly positive bias. Copper prices rebounded on Friday from their lowest since Jan. 14 hit in the previous session, as the U.S. dollar eased, but were heading for their sixth straight week of losses on a prolonged U.S.-China trade war. Codelco’s giant Chuquicamata mine is set for a 40% drop in production over the next two years, an internal forecast seen by Reuters shows, pointing to the sharp challenge facing the world’s top copper miner as it scrambles to maintain output. U.S. President Donald Trump said on Thursday Huawei could be included in the U.S.-China trade deal after last week banned U.S. firms from doing business with the Chinese company, which is the world’s largest telecoms network gear maker. Chinese steel futures edged down on Friday on worries about oversupply amid an increase in utilisation rates at mills, but they remained on track for a weekly gain.

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