base metals outlook

MARKET RECAP

Base metals struggled around their fresh multi-year lows on Friday as the complex remained gripped by depressed sentiment and fears of a deep global recession. A host of negative data from the US also added pressure on base metal prices. Base metals saw new lows on Friday as concerns over economic growth coupled with technical selling hit prices the hardest. Even LME inventory data was bearish for all metals except Nickel.

Copper prices declined below their strong support of $3,100 and touched a low of $2,990 on Friday. Continuous rise in LME inventories coupled with weak economic data pulled the red metal sharply lower. However, copper managed to close above $3,060 on Friday. Aluminum prices fell under $1,500 as prices felt the pressure of declining crude oil prices and weak economic situation. Overall the complex declined sharply on Friday as the release of US economic data raised concerns of the global recession that we are currently facing.

On the macroeconomic front, the US Labour Department announced that non-farm payrolls for the month of November stood at 533,000, its weakest performance in 34 years. This shows that the recession affected the jobs market to such a large extent. Another negative data was the release of US consumer credit that declined by $3.5bn or 1.6% at an annual rate.

OUTLOOK

The overall financial market scenario is weak and this has hurt trading sentiments across the globe. Hence, the trend in base metals remains down. Base metals may have witnessed few short-covering rallies in the past month but metals could not sustain at those levels as profit-booking emerged. Since markets are in a bearish phase technical selling cannot be ruled out. Along with that, a major rise in inventories has also put pressure on prices.

Copper prices dipped below their marginal cost of production of $3,100 and this indicates that markets are concerned over demand of the metal in times of a global recession. Aluminum price continue to face the threat of a fall in crude oil prices. Overall situation of rising inventories is also acting as a bearish factor. We expect base metals to remain volatile throughout this week.

On the macroeconomic front, weak economic performance across the globe is affecting trading sentiments. Financial markets are feeling the pain of the long and deep economic recession which is expected to continue through the next year.

Copper

Copper prices have been trading range bound for past few trading sessions with immediate support seen at Rs.163.10 levels for MCX Feb contract. Further below, support is seen at 159.40 levels.

Whereas resistance is seen at Rs.171.10 levels & further upwards at Rs. 176.80.

Zinc

Immediate support is seen at Rs.53.70 levels for MCX December contract whereas crucial support is seen at Rs.52.20 levels.

Short-term resistance is seen at Rs.56.50 whereas major resistance is seen at Rs 58.65.


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