Commodity outlook: Gold may show its positive side amid trade pain

Demand weakness gripped gold and silver on Friday. Jewellers, industries, retailers and investors have decided to hold back in their offtake.

MCX Gold futures were down 0.17 per cent whereas silver futures slipped 0.22 per cent at around 10.30 am.

Crude rose 0.36 per cent to Rs 4,459 per barrel at the same time. Copper in international markets retreated after a six-day rally that had pushed the metal to its strongest in 4-1/2 years in the previous session.

Here is how it will look like in precious metals and energy counters today. Motilal Oswal Securities gets you a lowdown.

Precious metals
Gold on the Comex continues to consolidate in a narrow range despite volatility in the dollar. In the past few sessions, the prices have failed to react to major economic data or any comments from US President on trade war.

Ongoing talks between the US and China have kept most market participants on the edge, but no major reaction has been seen on gold.

Focus will now shift to the key G-7 meeting where comments from the US President on trade war will be keenly watched.

For the day, Motial Oswal expects gold to quote in the range $ 1,285-1,308 in international markets. On domestic bourses, the metal will be influenced by movement in the rupee and is expected to trade with a positive bias.

Base metals
Base metals were mixed on Thursday, with copper slipping after rallying for six days. Concerns linger over possible supply disruptions in Chile and buying momentum picks up after the metal breaks key technical levels.

The union at BHP’s Escondida mine in Chile had started latest round of wage negotiations. Failure to reach deal in 2017 led to a strike that resulted in a near-8 per cent drop in annual output.

Meanwhile, Chile’s copper production in April jumped 6.4 per cent from the same month a year earlier, boosted by increased output at large, privately-held mines in the world’s top copper producer.

For Friday, markets await data of exports and imports from China which are expected to have grown at a solid pace in May, but slightly slower than April.

Energy
Crude prices traded higher over concerns of Venezuela’s struggles to meet its supply obligation. Venezuela is nearly a month behind in shipping crude to customers from its main oil export port as chronic delays threaten to breach PDVSA’s crude supply contracts.

Meanwhile, surprise builds on US crude stockpiles. US crude inventories rose 2.1 million barrels against a forecast for decrease of 1.8 million barrels, which kept pressure on prices. The key feature of market is widening discount of WTI and Brent spread, which has almost quadrupled since February to $ 11.40 per barrel, its steepest discount since 2015.

Motilal Oswal expects WTI crude to trade in $ 64.20-65.20. For natural gas, it closed higher in a choppy trade following release of report showing that last week’s storage build was smaller than normal but in line with estimates.

Meteorologists are expecting temperatures to remain higher than usual through at least late June which will keep demand for gas higher than normal.

Angel Commodities in a report shared its views on the outlook of agri commodities:

Agricultural commodities
Refined soy Oil: The brokerage expects refined soy oil to trade sideways to lower on expectations of technical correction as base import prices have been steeply reduced. However, reports of hike in import duty and improving demand from the stockists will support prices from lower levels.

Palm oil: CPO futures may stay muted due to weak international prices and higher domestic stocks. However, reports of a hike in import duty of soft oils may support prices.