Gold prices traded marginally lower but still hovered close to a two week high mark, primarily due to the political developments in the US amid uncertainty over the future of President Donald Trump. Investors are keeping a watch on the developments after US Justice Department Deputy Attorney General Rod Rosenstein appointed former FBI director Robert Mueller as special counsel to take over the investigation of Russia’s alleged interference in the US presidential election on Wednesday. This came after reports emerged that Trump had asked then-FBI Director James Comey to shut down an investigation into the actions of former National Security Advisor Mike Flynn, a serious allegation that could even lead to his impeachment if verified.
The turmoil has diverted all focus from Trump’s economic plans and investors are wary this may thwart Trump from pushing with his economic stimulus program. In the domestic market too, gold futures edged higher on MCX for similar reasons.
Among base metals, copper futures traded lower on MCX as investors and speculators cut down their bets in the industrial metal after political uncertainty in the US dampened expectations that President Trump would be able to boost infrastructure spending. Nickel futures traded lower on MCX as participants offloaded their holdings amid sluggish demand from alloy-makers and other consuming industries in the spot market.
Crude oil prices slipped as crude was well supplied in the market despite efforts by OPEC and other big exporters to curb production and support prices. This has been largely attributed to an increase in drilling in the US. However, investors are hopeful that the deal to cut production is likely to get extended by OPEC, which would help in the re-balance of oil demand and supply.
However, a report from IEA has stated that OPEC’s effort curb oil output may not be successful even if the oil group agrees to extend its supply-cut agreement as oil futures have erased most of the gains achieved since November, when OPEC and other producers, including Russia, agreed to cut output by about 1.8 million barrels per day (bpd).
In agriculture news, soybean futures traded marginally lower on NCDEX as speculators trimmed their positions due to ample supplies in the domestic as well as global markets. The prices also dropped due to lower demand in spot markets as 60% of soybean mills in Madhya Pradesh reported to have shut down because of subdued demand. Cardamom futures traded lower on MCX as speculators cut their positions, tracking a weak trend at spot market on easing demand. Further, ample stocks position on increased supplies from producing belts, too added pressure.
Meanwhile, turmeric futures traded higher on NCDEX due to rising domestic and export demand in the spot market. However, some gains were capped on expectation of good production in the ongoing season due to favorable weather conditions in major producing belts of Maharashtra, Telangana and Andhra Pradesh.
As expected, bullions rallied in previous session in line with our bullish view. Yesterday we saw tremendous rally in gold prices breaching its resistance however, we saw some profit booking late in the session. Silver prices erased all of its gain in the second session. Outlook remains bullish as the up move was so impulsive that we might see prices could move upward in higher top higher bottom formation. Gold may see the targets of 28,800 while silver can test 39,500 levels.
Crude oil prices headed higher above its resistance level of 3,177 levels. We might see positive momentum in prices in the coming sessions. RSI has also moved above 60 levels on hourly charts which would add bullishness in the prices. Natural gas prices have taken support near lower band of the rising channel formation formed on daily charts. We expect as long as lower band support of 203.50 is protected on downside, outlook remains bullish for upside target of 212.
We change the outlook for base metals to positive as yesterday we saw crucial trend reversal move. Aluminium has negated its head and shoulder formation formed on daily charts. Zinc has also given false break down of its lower band of sideways consolidation formation. Lead can head higher towards 136 if it breaches 134.50 levels.