Copper to trade positive on weak dollar, risk appetite, US rate cut hopes - ICICI Direct
Bullion Outlook
* Spot Gold is likely to rise towards $3610 level on weak dollar and softening of U.S treasury yields across curve. Further, data showed American employers hired fewer workers than expected, while increase in unemployment rate, confirming weak labor market conditions. As per CME FedWatch tool traders have fully priced in a 25 bp cut later this month with 8% chance of a jumbo 50 bp rate cut. If the data continues to picture weakness in economic activity, 3 rate cuts in this year cannot be ruled out. We may witness 25bps rate cut in each FOMC meeting. Furthermore, demand for safe haven may increase on trade uncertainties, concerns over U.S Fed independence, lingering geopolitical tensions and worries about fiscal health of major economies. Moreover, all eyes will be on France where Prime Minister Francois Bayrou faces a confidence vote, which he is expected to lose, plunging economy deeper into political crisis. MCX Gold Oct is expected to rise towards Rs.108,500 level as long as it stays above Rs.107,000 level
* MCX Silver Dec is expected to face stiff resistance near Rs.126,000 level and slip towards Rs.123,000 level.
Base Metal Outlook
* Copper prices are expected to trade with a positive bias on weakness in dollar and rise in risk appetite in the global markets as gloomy U.S. labor data cemented the case for rate cuts this month. Moreover, prices may move north on signs of increasing demand from China. Yangshan copper premium a gauge of China's appetite for importing copper rose to $57 a ton, 3-month high. Additionally, on supply side market continues to face issue. Newly introduced tax regulations to constrain the supply of scrap copper, China's refined copper production is forecasted to get hit this month. Moreover, Japan's top copper smelters JX Advanced Metals said it was likely to cut copper production by tens of thousands of tons in the fiscal year due to tight copper concentrate supply
* MCX Copper Sep is expected to rise towards Rs.905 level as long as it stays above Rs.895 level.
* MCX Aluminum Sep is expected to slip further towards Rs.252 level as long as it stays below Rs.255 level. MCX Zinc Sep is likely to move south towards Rs.272 level as long as it stays below Rs.277 level.
Energy Outlook
* Crude oil is likely to trade with negative bias and slip towards $61.0 level on concern over supply glut after OPEC+ decided to raise output again. 8-members of OPEC+ agreed to raise production from October by 137,000 barrels per day, lower than the monthly increases of about 555,000 bpd for September and August and 411,000 bpd in July and June. Further, build in US crude oil stockpiles, signals weak demand. Furthermore, weaker than expected economic data from U.S fueled the concerns over economic health of the country. Moreover, investors are worried that U.S tariffs will hurt global economic growth when countries are struggling to regain momentum.
* WTI crude oil is likely to slip towards $61.0 level as long as its trades below $63.50. MCX Crude oil Sep is likely to dip towards Rs.5400 level as long as it stays below Rs.5600 level.
* MCX Natural gas Sep is expected to rise towards Rs.278 level as long as it stays above Rs.262 level.
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