Disappointing data from USA should keep gold prices positive. Reduced supply on nickel pig iron size, should help nickel prices.
Motilal Oswal
Gold and silver prices extended gains for yet another week as the dollar index declined on disappointing U.S. economic data. U.S. data over the past month has shown persistent weakness and the latest jobs data missed expectations by a huge margin. Non-farm payrolls increased by just 126k in March, the lowest print in more than a year which pushed back expectations of a rate hike by the Fed. Earlier, the Fed dropped the word 'patient' from its statement as widely expected, but lowered its estimate for where the federal funds rate will be by the end of 2015. Following this, most economic data ranging from GDP to employment to durable goods orders to housing starts has been disappointing which has supported gold prices. Considering this, the short term trend in gold is likely to stay positive and only a string of positive economic data will cap rallies.
Crude oil prices gained marginally again last week as expectations that Iran oil may not come into the market this year lifted prices. The progress of Iran's talks with P5+1 has raised concerns over trade sanctions being lifted off Iran but markets haven't fully discounted Iran returning to oil markets as doubts remain if a final agreement will be achieved by June . Earlier, geo-political risks took center stage after Saudi and its allies launched strikes in Yemen. Although, Yemen is a marginal oil producer, a key oil chokepoint passes through Yemen and markets are worried over disruption to supplies arising from closure of this key transit point. Also, fire at a big oil platform in Mexico led to short covering by the end of last week. Meanwhile, OPEC output edged higher in March and U.S. inventories continue to inch higher which means oversupply concerns remain and will cap oil prices at higher levels. A weaker dollar may however fuel a short term uptrend.
Last week turned out to be another volatile for most asset classes, with base metals being highly volatile amongst them. With a short trading week or extended weekend in most parts of the world, participants chose to stay light on positions. Copper prices were under selling pressure with attempts of pullbacks, while Nickel prices were very volatile, starting the week to hit a 6 year low and bouncing back sharply. In the week ahead, markets outside the U.S. will remain closed on Monday. The U.S. is to release service sector activity on Monday and the Federal Reserve is to publish the minutes of its March meeting on Wednesday. Recovery in nickel was expected, having been oversold. The fundamentals of the complex remain worrisome and an oversold technical situation will go only so far in stabilizing the market. What will be more effective, is if we start to see reduced supply coming into the market, especially on the nickel pig iron side, where most Chinese producers are reported to be unprofitable. We remain positive on nickel prices and expect rallies to extend towards 840 and 856 in the coming days.
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Gold nickel to be positive in short term: Navneet Damani
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