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Topic: Technical Calls
Base metals rise over 6% on fund buys
| From : Sadiq Khetani at 01:04 PM - Jun 20, 2009 (32 months ago) |
Base metals prices showed a good movement this week following the investment fund buying and optimism about the economic recovery. Most of the base metals showed an upside of over 6% as compared to the previous week.
According to base metals research analyst Reena Walia from Angel Commodities this rally may not be sustainable. She said that rising prices indicate that the economic downturn is bottoming out and this could encourage miners and smelters to restart capacities, thereby creating an oversupply in the market. “This premature rise in the overall complex may also witness selling pressure as demand can show a decline during the summer season,” she added.
In the coming week some important economic data from US is expected which includes industrial production, capacity utilisation, housing starts data and manufacturing index. According to the analysts these data can keep the markets volatile.
Kunal Shah, assistant vice president at Nirmal Bang Commodities feels that since base metals have shown a good rally one might see profit booking in the coming week. “Also if dollar strength continues in coming week one might see pressure on base metals complex,” he said.
During the week copper June contract on MCX closed 5% up at Rs 259 per kg compared to previous week. Zinc closed 6.7% up at Rs 78.6 per kg, lead closed over 7% at Rs 83.5 per kg. Nickel closed over 6% at Rs 733.7 per kg, aluminium closed over 5% at Rs 77.25 per kg and tin closed 13% up at Rs 766 per kg. On LME copper closed 4.4% up at $5225 per tonne and other metals were also up by over 6%.
Prices during the week were supported by Chinese data that indicated that industrial production for May came in better than expected at 8.9% year on year while there was also expansion seen in credit and consumer spending.
Even dollar was loosing its strength due to rising equity markets which led the investors move away to riskier asset classes. Dollar however gained strength on June 12 following a rise in yield of US Treasury notes that led to a sell off in risk sensitive currencies and supported the dollar.
According to base metals research analyst Reena Walia from Angel Commodities this rally may not be sustainable. She said that rising prices indicate that the economic downturn is bottoming out and this could encourage miners and smelters to restart capacities, thereby creating an oversupply in the market. “This premature rise in the overall complex may also witness selling pressure as demand can show a decline during the summer season,” she added.
In the coming week some important economic data from US is expected which includes industrial production, capacity utilisation, housing starts data and manufacturing index. According to the analysts these data can keep the markets volatile.
Kunal Shah, assistant vice president at Nirmal Bang Commodities feels that since base metals have shown a good rally one might see profit booking in the coming week. “Also if dollar strength continues in coming week one might see pressure on base metals complex,” he said.
During the week copper June contract on MCX closed 5% up at Rs 259 per kg compared to previous week. Zinc closed 6.7% up at Rs 78.6 per kg, lead closed over 7% at Rs 83.5 per kg. Nickel closed over 6% at Rs 733.7 per kg, aluminium closed over 5% at Rs 77.25 per kg and tin closed 13% up at Rs 766 per kg. On LME copper closed 4.4% up at $5225 per tonne and other metals were also up by over 6%.
Prices during the week were supported by Chinese data that indicated that industrial production for May came in better than expected at 8.9% year on year while there was also expansion seen in credit and consumer spending.
Even dollar was loosing its strength due to rising equity markets which led the investors move away to riskier asset classes. Dollar however gained strength on June 12 following a rise in yield of US Treasury notes that led to a sell off in risk sensitive currencies and supported the dollar.
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