Base Metals Trade With Negative Bias, Nymex Crude Oil Drops

Rising concerns over exit of Greece from the eurozone coupled with deepening tensions with respect to eurozone debt worries resulted rise in risk aversion in the global markets today.

The Reserve Bank of India (RBI) asked the exporters to sell half the foreign currency in their accounts and also making it easier for the market to absorb large foreign exchange transactions. This support appreciation in the Indian rupee in today’s trading session.

Spot gold prices traded on a flat note and touched a low of $1585/oz till 4.30 pm IST today. Strength in the US Dollar Index and weak market sentiments affected the yellow metal prices. MCX gold June contract declined around 0.8 percent on account of a stronger Rupee and touched a low of Rs. 28,300/10 gms till 4.30 pm IST today.

Taking cues from a stronger dollar, downside in base metals pack and rise in risk aversion in the global markets, spot silver prices dropped slightly by 0.1 percent till 4.30 pm IST today. Silver on the MCX dropped sharply by more than 1 percent due to appreciation in the Indian currency.

The base metals complex traded with a negative bias on the LME today on the back of worsening situation of European debt crisis coupled with strength in the US Dollar Index. Copper prices slipped by 0.3 percent on the LME and by more than 1 percent on domestic bourses.

However, LME inventories of copper declined by 0.5 percent to 219,850 tonnes today which cushioned sharp fall in the red metal prices. On the MCX, prices touched an intra-day low of Rs.432.80/kg and hovered at Rs.434.25/kg today till 4:30pm IST.

Nymex crude oil prices dropped by 0.4 percent taking cues from expectations that Europe’s debt crisis will worsen further coupled with rise US crude oil inventories which stood at its highest point in 22 years. Additionally, a stronger Dollar Index also acted as a negative factor for the crude oil.

It touched an intra-day low of $96.08/bbl and hovered at $ 96.46/bbl till 4:30pm IST. On the MCX, oil prices declined by 1.2 percent after touching an intra-day low of Rs. 5135/bbl and was trading at Rs. 5160/bbl till 4:30pm IST today.

Outlook

Mounting concerns over exit of Greece from the eurozone and tensions over eurozone debt crisis will lead to weak sentiments in the global markets today. On account of this, we expect precious metals and base metals to trade with a negative bias in the evening session.

In addition to this, a stronger dollar will also exert further downside pressure on commodity prices. US unemployment claims are expected to be on a negative side today and if the data come as expected then this will lead to further downside in prices.

In the evening session, we expect crude oil prices to trade lower on account of worsening European debt crisis, expectations of negative US economic data along with strength in the US Dollar Index.