Market and product

Precious Metals declined sharply during the final week of 2015 with Gold and Silver losing over 1% and 4% respectively as the market decided to ignore stronger data flow from the US. Market action last week was also coupled with low liquidity and high volatility.

Base Metals also had a range bound trading as the LME remained closed mostly with prices ending the week lower. Crude Oil continued to consolidate below $38.24/bbl consolidating at current levels. Crude Oil inventories report from the EIA showed that stock rose 2.6m bbls last week despite the API forecasting another draw in prices. Natural Gas recovered sharply last week extending gains on colder weather and draws in the inventory report.

The focus will again shift back to macro-economic data this week. On the data front, we have ISM Manufacturing PMI on Monday, ADP Non Farm Employment Change figures, Non Manf PMI, Factory Orders and Oil report on Wednesday, Unemployment Claims and Gas storage report on Thursday followed by Non Farm Employment Change and Unemployment Rate on Friday. Reports of escalating tensions between Saudi and Iran could be positive for Gold prices this week.

Gold has been trading higher this morning and a strong close with volumes above $1070.0 (Rs.25220.0) could prices higher to $1080.0-$1090.0 (Rs.25450.0-25650.0) this week, part of the strength today has been due to weaker rupee prices. Silver is also trading above the range of $13.92-$13.77 and could see potential rallies to $14.0-$14.30 (~Rs.34500.0) this week.

Base Metals are expected to trade with a weaker bias this week with a crucial support coming into play at $4631.0 (Rs.310.0). A strong close below this level with volumes should see prices decline to $4575.0-$4530.0 (Rs.306.50-Rs.304.50) this week and possibly lower. The rest of the base metals group is also expected to move lower.

Crude Oil is trading with a negative bias early this week and unless we witness a strong daily close above resistance at $38.24/bbl, prices are unlikely to reverse course in the short term. The fundamentals remain largely unchanged though the lifting of crude exports ban from the US could support prices going ahead.

Above $38.24 (Rs.2555.0), we expect oil to move into the range of $40.0-$45.0 whereas on the downside, $35.0 (Rs.2350.0) is a likely target this week. Natural Gas may see a minor correction this week though colder weather and declining stocks should see prices recover later this week.