Outlook on Gold, Crude oil and Copper By Abhishek Bansal, Abans Group
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Below are Views On Outlook on Gold, Crude oil and Copper By Mr. Abhishek Bansal, Founder Chairman, Abans Group
Copper prices to find support from a drop in inventory:
Copper prices are trading marginally up, due to weakness in the US dollar. Increasing optimism over the US stimulus plan is likely to support Copper prices. U.S. President Joe Biden's administration has been fighting for its $1.9 trillion COVID-19 relief plan. However, the rising number of covid cases in China is limiting the gains in metals.
On the economic data front, the German government on Friday cut its 2021 German GDP estimate to 3.0%, from a 4.4% projection in October. The U.S. January Markit Manufacturing PMI unexpectedly rose +2.0, to 59.1, stronger than expectations of -0.6, to 56.5, and December existing home sales unexpectedly rose +0.7%, to 6.76 million, stronger than expectations of a decline to 6.56 million.
China has overtaken the US as the world's top destination for new foreign direct investment, according to UN figures released on Sunday. China had $163bn (£119bn) in inflows last year, compared to $134bn attracted by the US. In 2019, the US received $251bn in new foreign direct investment, while China received $140bn. China is the leading consumer of base metals, and it is likely to increase the global demand for Copper.
Copper stock at SHFE has dropped nearly 40,795 mt in the last three months, and now stands at 23,286 mt, as on 22nd January, 2021. Meanwhile, Copper stock at LME has dropped near 92,900 mt in the last three months, and now stands at 87,725 mt, as on 22nd January, 2021.
Copper prices are likely to trade firm, while remaining above the key support level of the 20-days EMA of $7,955 per mt, and the 50-days EMA of $7,701 per mt. Meanwhile, key resistance is seen near $8,145-$8,243 per mt.
Covid lockdown concerns are likely to keep oil prices under pressure:
WTI Crude prices are trading near $52.30, with moderate losses. Rising number of Covid cases in China is likely to keep oil prices under pressure. However, rapid expansion of vaccination in leading economies is likely to support the prices.
China reported a climb in new Covid-19 cases on Monday, which is likely to implement more restrictions in the economic activity, to prevent the rapid spread of the virus, and halt energy demand. JPMorgan cut its China January crude oil demand forecast by -60,000 bpd, cut its February demand forecast by -150,000 bpd, and cut its China March crude demand forecast by -113,000 bpd. The Chinese government is discouraging travel during the upcoming Lunar New Year holidays.
According to the CFTC Commitments of Traders report for the week ended January 19, net long for crude oil futures sank -19,133 contracts to 508,584 for the week. Speculative long positions slumped -27,482 contracts, while shorts fell -8,349 contracts.
Meanwhile, the IEA cut its Q1 global crude consumption estimate by 580,000 bpd. While, for the entire 2021, the IEA cut its global crude demand forecast by -280,000 bpd, to 96.6 million bpd, although that would still be up by +5.5 million bpd (+6%), from 2020.
WTI Crude oil prices for the March expiry contract are likely to find support near the 20 days EMA at $51.52 per barrel. Meanwhile, critical resistance is seen around $54.85 per barrel, and $56.13 per barrel.
Stimulus hopes and weakness in the Dollar are keeping gold prices firm:
Gold prices are trading with a positive trend, due to weakness in the Dollar Index and increasing optimism of the US economic stimulus.
On the economic data front, Japan’s December National CPI (ex-fresh food & energy) fell -0.4% y/y, the fastest pace of decline in 7-1/2 years. A drop in inflation is negative for gold prices, as investors consider gold as a hedge against inflation.
The worsening pandemic is curbing global economic growth, and is likely to keep gold prices firm. The overall number of global coronavirus cases has topped 99.15 million, while the deaths have surged to more than 2.12 million, according to the Johns Hopkins University.
According to the CFTC Commitments of Traders report for the week ended January 19, net long for gold futures increased by 411 contracts to 246,638 for the week. Speculative long positions slumped -5,710 contracts, while shorts fell -6,121 contracts.
Gold prices are likely to find support at the 200-days EMA at $1,832 per ounce, while key resistance is likely to be seen around the 50-days EMA at $1,867.
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