On the Comex, USD 1270 is a key support and as long as prices hold above it, trend could stay sideways to positive.
Precious metals continue to be tied in a range in the international markets but sharp appreciation in the INR last week pulled domestic prices lower. Worries over the situation in Ukraine where an election is due next week has kept precious metals from declining too much but at the same time, US economic data presents a strong upside resistance to any upside rally. US data during the week, particularly housing and jobs data were very positive and overall weakness in the euro pressured prices. US data also reinforces the view that the Fed will continue its taper and end its asset purchases by the end of this year that is broadly negative for precious metals. We believe that the next few weeks could be interesting for gold as the election outcome in Ukraine and the ECB meet in June will provide a trigger for prices. On the Comex, USD 1270 is a key support and as long as prices hold above it, trend could stay sideways to positive.
The energy complex had a mixed trend last week with WTI crude gaining more than 2 percent on persistent worries over Ukraine and Libyan supply while Natural gas fell more than 2 percent as inventories continue to refill at a faster pace. The continuing drop in Cushing stockpiles coupled with declining gasoline inventories is keeping Crude oil prices higher. On the data front, overall US economic data has been supportive but industrial production data from both US and China disappointed last week. In the domestic markets, the sharp appreciation in the local currency prevented some of the gains in crude oil. Geopolitical events continue to be the underlying narrative in crude oil with the events in Ukraine on one hand while renewed uncertainty about Libyan supply on the other. We expect the short term bias to stay positive on the Nymex and crude oil could target USD 103.80 if it manages to break USD 102.50 on the upside. On the downside, USD 99 is a strong support.
Base metals continued to trade firm after some losses from a reported decline in industrial output in the US, and a firm footing from Chinese data during the start of the week. However, overall economic conditions cling towards growth, improving long-term outlook for copper. Demand in China boosted the metal last week, as construction is in peak season. This week is a data heavy week for base metals as PMI numbers from China and Eurozone followed by factory activities from China and EU, keeping participants active. Copper prices have broken out of their recent range, but in the near term, the question is that how much further they can go. Concerns of shortage prompted a rally with nickel hitting a 27-month peak earlier last week, sparking some profit taking. Despite an 11 percent fall mid last week, nickel prices are still up 38 percent YTD. We expect bias for metals to be firm and can be bought for a 2.5-3 percent upside.
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