MUMBAI: Equities tumbling under pressure from clampdown on credit off take and US Federal Reserve policy meet later today, led to a subsequent downfall in commodity prices.
However, some technical support at lower levels, especially gold – the yellow metal continues to hold above $1,070 support level – and crude oil refusing to fall below 100-day moving averages is helping commodity traders to have optimistic view on the market trend for now.
US dollar steadying trend against the basket of currencies ahead of Federal Reserve policy meet has played crucial role in preventing further decline in commodity prices.
Meanwhile, crude futures stood little changed below $75 a barrel this morning in Asian trade even as industry data showed a surprise drawdown in US crude inventories last week.
NYMEX crude for March delivery was down 5 cents at $74.66 a barrel, after settling down 55 cents a day earlier. On Tuesday, crude hit a trough of $73.82, its lowest since December 22.
The American Petroleum Institute (API) said after settlement on Tuesday that US crude stocks fell 2.2 million barrels. US distillate stocks dropped 2.0 million barrels, and gasoline stocks rose 916,000 barrels, the data showed, which was mostly in line with expectations.
Markets will be watching inventory data from the US Department of Energy to be released later today.
Precious metal complex too had a muted performance so far. Gold futures edged up this morning on speculation that the US dollar’s rally will stall, boosting the appeal of the precious metal as an alternative investment.
However, the momentum was lost as the greenback advanced against basket of currency on refuge demand. The US dollar rose as much as 0.6% against a basket of six major currencies before retreating.
Spot gold quoted at $1,095.10 an ounce, down $2.7. Gold futures for April delivery quoted marginally lower $1,097.50 an ounce on the New York Mercantile Exchange’s Comex unit.
Earlier, the price dropped to $1,086.50. Gold is up 21% in the past year as the dollar fell 7.4%. The yellow metal rose for the ninth straight year in 2009, surging 24% and touching a record $1,227.50 on December 3.
Silver and platinum, precious metals that have wider industrial uses than gold, fell on speculation China’s moves to curb lending will slow global growth and dampen demand.
is starting to take steps to cool the economy, which grew in the fourth quarter at the fastest pace since 2007.
The central bank ordered lenders on Jan. 12 to raise the ratio of deposits they hold in reserve, limiting the amount of cash available for loans.
Base metal counters put up a strong resistance against the weak cues emerging out of the markets. Shanghai copper is seen trading steady, but the firmness in the US dollar, fears of further policy tightening in China and US plans to tighten bank trading rules will weigh on prices.
Three-month copper on the London Metal Exchange (LME) fell $70 to close to $7,395 a tonne on Wednesday, and extended losses to $7,378 in after-hour trading.
When Shanghai closed on Tuesday, LME copper stood at $7,341.25 a tonne. The contract last quoted at $7,380 a tonne, up $30. Other base metal counters traded mixed. While Aluminum, lead and nickel prices trended up, tin and zinc prices eased in early trades.
The domestic commodity futures traded mixed this morning tracking global cues.
On MCX, crude oil contract for near-month settlement was last quoting at Rs 3,480 a barrel, off its early highs of Rs 3,483. The contract started the session at Rs 3,469.
Precious metal counters too retreated lower from early highs. MCX Gold for February settlement broke the psychological level of Rs 16,500 at opening.
It started the session at Rs 16,495 per 10 gram. After a brief stay at Rs 16,546, the contract has retreated to current level of Rs 16,517 per 10 grams.
MCX Silver March settlement contract traded 1.3% lower at Rs 26,450 per kg, after having opened the session at Rs 26,751.
Base metal counters succumbed to huge selling pressure ahead of contract expiry date, especially zinc and nickel.
MCX copper for February settlement lost 1% to trade at Rs 341.650 per kg, tracking broader decline in metal prices. MCX zinc January contract lost 0.9% to quote at Rs 105.90 a kg.
