Base Metals opened yesterday on a stronger note after FOMC minutes showed members demanding more Easing along with fresh hopes from China after yet another disappointing Economic data report. The release of minutes from the most recent meeting of the U.S. Federal Open Market Committee suggested increased support for more quantitative easing if a substantial and sustainable improvement does not occur soon. Base Metals saw a round of gains along with the Precious Metals pack and would likely have been at even higher levels, were it not for a spate of sub-par purchasing managers’ indices that were released later in the day. The HSBC/Markit preliminary Purchasing Managers index for Europe came in at 46.6, the seventh straight month of contraction. The Chinese index hit a nine-month low of 47.8 in August compared with a final reading of 49.3 in July. Base Metals retreated modestly from the gains earlier in the day.
Rio Tinto chief Andrew Harding says, ” Is it a case of stimulus or no stimulus, we do not know yet; is it a case of bullish Copper Prices or not, we do not know yet. But the long term Copper outlook remains positive.” reported Reuters. The International Copper Study Group (ICSG) report for May 2012 was in deficit and that is likely to remain supporting Copper in near term. Refined Copper markets were in production deficit of 21000 tones in May 2012, as per release from International Copper Study Group (ICSG). The report showed that after making seasonal adjustments the surplus was much higher at 42000 tones. For the first five months of the year, refined Copper deficit was 405000 tones, compared to 98000 tones during similar period last year. Mine production in the month of May 2012 was 1.41 million tones, up 3.6% from 1.36 million tones in April 2012. World refined Copper production increased by 4.5% to 8.28 million tones in January-May 2012, compared to 7.92 million tones in January -May 2011. MCX Copper August shot up yesterday to Rs. 426.80 but traded down later in the night.
Rise in Base Metals & Gold will help Silver Prices rise further:
Silver production is linked to the output of Copper and Zinc mines. Pure-play Silver mines are rare and Silver is often obtained from Zinc and Copper mines in an also-mined fashion. Silver is the only major commodity not to have reached a new all-time high in the Gold Bull Run. Even Copper is relatively at much higher levels as compared to the entire average of the last 2 years. Silver Prices are yet astonishingly depressed. Also, added the fact that India, the largest buyer / consumer of Gold, has Gold Prices at record highs due to the heavily depreciated INR – Indian Rupee against the US Dollar. Traditional Investors & Traders in Gold will remain uneasy investing in Gold at higher prices only seen in Indian Markets out of fear in case the INR starts climbing, Gold may lose value in the Indian currency though may be seen rising in International markets, once the US$ starts falling. Similar was the case, albeit in reverse order, when Gold fell sharply from its all time high of $1925 to $1535. Gold shot up further in Indian markets while actually declining in the International Trade as an after effect of the faster depreciating INR. With a major chunk of Investors moving out of the Gold markets may find higher value for money invested & a safer Option in Silver Trading.
High optimism around the world regarding massive Monetary Easing coming from China, Europe & the US will add to investors seeking a safe haven option to guard against depreciating currency. Gold & Silver have traditionally been considered preservers of wealth in times of crisis. Huge money printing will always trigger higher inflation. Base Metals will also attract investments when theUS$ declines. Silver will obviously rise more due to its pricing which is yet at technically lower levels. As also alerted earlier, Copper & Lead may find more support with Nickel, Zinc & Alluminium following them leading the entire Base Metals pack higher. Read more in –Copper & other Base Metals may rally too: Article – Silver Trading Boom Around The Corner.
MCX Silver Trading yesterday saw a gap up opening in Silver Prices to Rs. 56,400 from the day’s low of Rs. 55,425. MCX Silver climbed further to Rs. 57,180 later in the day. MCX Gold Trading too saw a gap up opening in Gold Prices shooting up to Rs. 30,699 from the day’s low of Rs. 30,370. MCX Gold climbed further to Rs. 30,840 towards the end of the day’s session.
Crude Oil slumped in the later part of the session yesterday & has also opened weak today. MCX Gold October has potential support at around Rs. 30,655 levels & till above this, can sharply rise to the day’s first target of Rs. 30,970 from early dips. MCX Silver Sep too may see trades shooting upside from a support level around Rs. 56,400 (till above this level) to Rs. 57493 or even to Rs. 58213. MCX Crude Oil Sep on sustaining above Rs. 5356 has the potential to again rise close to Rs. 5500 levels.