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Gold

Yesterday, gold prices declined by 0.17% to settle at 72,980 as investors processed a mix of US economic data. The initial jobless claims fell close to forecasts, while import and export prices increased more than expected. On the other hand, housing starts and building permits were disappointing, and industrial production unexpectedly stalled. The latest US inflation data showed monthly inflation slowing to 0.3%, slightly below predictions, with the annual headline rate dropping to 3.4% and the core rate to 3.6%. Additionally, US retail sales were flat in April, with higher gasoline prices impacting spending on other goods, suggesting a weakening in consumer spending momentum. The unchanged retail sales followed a downwardly revised 0.6% increase in March. The mixed economic data has led investors to speculate on a more than 70% chance of a Federal Reserve rate cut in September. Chicago Fed Bank President Austan Goolsbee expressed optimism about declining inflation, while Fed Bank of New York President John Williams indicated a need for more evidence before adjusting interest rates. In the global context, South Africa's gold production fell by 4.5% year-on-year in March 2024, marking the fifth consecutive month of decline, following a revised 5% decrease in February. This decline negatively contributed 0.7 percentage points to the volume of mining production. From a technical perspective, the gold market is experiencing long liquidation, as evidenced by a 5.94% drop in open interest, settling at 11,044 contracts. Prices fell by 122 rupees, indicating some profit-taking or repositioning by traders. Currently, gold has support at 72,720, and if it falls below this level, it could test 72,460. On the upside, resistance is seen at 73,255, and a move above this level could push prices towards 73,530.
 

Trading Ideas:
* Gold trading range for the day is 72460-73530.
* Gold settled flat as investors digested mixed economic data from the US.
* Initial jobless claims fell roughly in line with forecasts, import and export prices rose more than anticipated.
* Stalling retail sales and previously soft labour data boded well for less restrictive Fed stance.


Silver
Yesterday, silver prices rose by 0.5% to settle at 87,300 as traders navigated through mixed economic data from the US and its potential impact on the Federal Reserve's monetary policy. US housing starts came in lower than expected, while initial jobless claims fell by 10,000 to 222,000 for the week ending May 11th, slightly above market expectations of 220,000. Despite being the third-highest reading this year, the jobless claims remain elevated compared to the last nine months' average, indicating a weakening labor market in the US. Chicago Federal Reserve Bank President Austan Goolsbee expressed optimism that inflation would continue to decrease, mirroring Fed Chair Jerome Powell's earlier comments, which suggested that further interest rate hikes are unlikely. Similarly, Minneapolis Fed President Neel Kashkari emphasized the need to maintain the current interest rate levels for a while longer, whereas New York Fed President John Williams called for more evidence before considering rate reductions. In addition to these mixed signals, export and import prices in the US accelerated, adding another layer of complexity to the economic outlook. From a technical perspective, the silver market is witnessing fresh buying activity. This is evident from a 0.74% increase in open interest, which settled at 29,705 contracts. Prices increased by 435 rupees, indicating renewed buying interest. Currently, silver has support at 86,945, and a drop below this level could lead to a test of 86,590. On the upside, resistance is expected at 87,575, and a move above this level could push prices towards 87,850.
 

Trading Ideas:
* Silver trading range for the day is 86590-87850.
* Silver gains as traders assessed mixed economic data from the US.
* The number of people claiming unemployment benefits in the US fell by 10,000 to 222,000.
* Fed’s Goolsbee said he was optimistic inflation would continue to come down.


Crude oil
Yesterday, crude oil prices rose by 0.98% to settle at 6,615, driven by a larger-than-expected drop in US oil inventories and revived hopes for lower US interest rates. The market found additional support from signs of slower inflation and a stabilizing US job market, which suggest potential future rate cuts that could boost demand. The EIA reported that US crude oil, gasoline, and distillate inventories all declined, reflecting increased refining activity and higher fuel demand. Specifically, crude inventories fell by 2.5 million barrels to 457 million barrels for the week ending May 10. In contrast, the IEA revised down its forecast for global oil demand growth for the year by 0.14 million barrels per day to 1.1 million barrels, citing weaker demand in developed OECD nations. Geopolitical tensions in the Middle East also added to market uncertainties, with reports of fatalities among Israeli soldiers due to friendly fire in Gaza, amid ongoing conflict with Hamas militants. The American Petroleum Institute (API) further corroborated the EIA's findings, reporting a decline in US crude oil stocks by 3.104 million barrels for the week ending May 10, marking the largest weekly drop in three weeks and exceeding market expectations of a 1.35 million barrel draw. Technically, the crude oil market is experiencing short covering, as evidenced by a 14.6% drop in open interest, settling at 5,288 contracts. Prices increased by 64 rupees, indicating a reduction in bearish positions. Currently, crude oil has support at 6,542, with a potential test of 6,470 if this level is breached. On the upside, resistance is likely at 6,674, and a move above this level could push prices towards 6,734.
 

Trading Ideas:
* Crudeoil trading range for the day is 6470-6734.
* Crude oil gains amid larger than expected drop in inventories and revived hopes for lower US interest rates.
* Support also seen bolstered by slower than expected inflation and a stabilising U.S. job market, providing positive signs.
* Extension to OPEC cuts the most likely outcome to the June 1 meeting to review supply policy.


Naturalgas
Natural gas prices surged by 4.63% to 208.1, driven by a significant drop in output and increased demand from liquefied natural gas (LNG) export facilities. Notably, Cheniere Energy's Sabine Pass export plant in Louisiana is expected to return to full capacity, bolstering feedgas demand. U.S. natural gas production has declined by approximately 10% in 2024, with key energy companies like EQT and Chesapeake Energy delaying well completions and reducing drilling activities due to earlier price declines. Weather forecasts predict warmer-than-normal temperatures from May 18-30, which is anticipated to boost natural gas consumption for air conditioning needs, further supporting prices. U.S. utilities added 70 billion cubic feet (bcf) of gas into storage for the week ending May 10, 2024, falling short of the market expectation of a 76 bcf increase, marking the sixth consecutive week of storage increases. This data highlights ongoing supply constraints in the market. LSEG reported that gas output in the Lower 48 U.S. states averaged 97.1 billion cubic feet per day (bcfd) so far in May, down from 98.2 bcfd in April, and significantly lower than the record high of 105.5 bcfd in December 2023. Additionally, on a daily basis, output dropped to a preliminary 17-week low of 95.7 bcfd, further emphasizing the production shortfall. Technically, the natural gas market is under fresh buying pressure, evidenced by a 1.72% increase in open interest to settle at 23,412 contracts, with prices rising by 9.2 rupees. Currently, natural gas has support at 200.6, and if this level is breached, it could test 193. On the upside, resistance is expected at 214.9, with potential for prices to reach 221.6 if this level is surpassed.
 

Trading Ideas:
* Naturalgas trading range for the day is 193-221.6.
* Natural gas climbed on another drop in output and a rise in feedgas to LNG export plants
* US utilities added 70 billion cubic feet (bcf) of gas into storage
* Weather forecasts indicate a shift to warmer-than-normal temperatures from May 18-30


Copper
Copper prices edged up by 0.26% to settle at 894.3, buoyed by growing concerns over bullish demand amidst tightening supply conditions, which could potentially lead to deficits in the market. The metal's indispensable role in various industries, especially in electrification for applications like electric vehicle charging and grid-scale energy storage, reinforced predictions of its continued utility. China's increased imports of copper ore despite surging prices signaled robust demand from manufacturers, instilling hopes of industrial momentum, particularly following Beijing's initiative to issue long-maturity bonds. However, the scarcity of material posed challenges for smelters in China, which contribute to over half of global supply, impacting their margins and putting pressure on output. Expectations for additional mine supply remain subdued, as the high costs associated with new projects have prompted major miners to prioritize mergers and acquisitions over initiating new ventures, as evidenced by BHP's recent bid to acquire Anglo American. In response to the soaring prices, the CME Group raised margin requirements for trading copper futures to $5,000 per contract, reflecting the heightened volatility in the market. This move comes amidst reports of commodity traders Trafigura and IXM seeking physical copper to cover significant bearish positions on the CME exchange, where copper futures have hit record highs. Technically, the copper market witnessed short covering, with a 1.23% drop in open interest to settle at 5,240 contracts, while prices rose by 2.35 rupees. Currently, copper has support at 888.2, with a potential test of 882 if this level is breached. On the upside, resistance is expected at 901, with the possibility of prices testing 907.6 upon surpassing this level.
 

Trading Ideas:
* Copper trading range for the day is 882-907.6.
* Copper gains supported by increasing concerns of tight supply
* China imported more copper ore inputs despite the sharp increase in prices, highlighting demand from manufacturers..
* The low availability of material hampered margins for smelters in China, responsible for over half of global supply, and pressured their output.


Zinc
Zinc prices experienced a slight decline of 0.27% to settle at 261.25, driven by news of increased refined zinc production in China for May 2024. China, a key player in the global zinc market, is expected to ramp up production by 26,800 metric tons compared to the previous month, reaching 531,400 metric tons. This increase is attributed to production resumptions after maintenance and output boosts at smelters across various provinces. However, some regions may see a decrease in output due to raw material issues and equipment maintenance. In addition to China's production dynamics, the decision by Swedish mining giant Boliden to resume operations at its Tara zinc mine is expected to impact market dynamics. The mine, idled in 2023 due to cost and production challenges, will restart operations in the fourth quarter of this year, aiming to reach full capacity by January 2025. Despite these developments, the global zinc market is facing surplus conditions, with the surplus widening to 40,100 metric tons in February, according to data from the International Lead and Zinc Study Group (ILZSG). This surplus contrasts sharply with a deficit recorded in the same period last year, reflecting changes in supply and demand dynamics. Technically, the zinc market is witnessing long liquidation, as open interest declined by 3.58% to settle at 2,830 contracts, while prices decreased by 0.7 rupees. Currently, zinc has support at 259.6, with potential testing of 257.9 if this support is breached. On the upside, resistance is expected at 263.5, and a move above this level could push prices towards 265.7.
 

Trading Ideas:
* Zinc trading range for the day is 257.9-265.7.
* Zinc dropped as China’s refined zinc production in May 2024 will increase by 26,800 mt.
* The production resumption after maintenance and increase in output at smelters in Gansu, Xinjiang, Liaoning, Hunan, Henan and Sichuan.
* Swedish mining giant Boliden to resume production at its Tara zinc mine.


Aluminium
Aluminium prices edged up by 0.17% to settle at 238.05, supported by a weaker U.S. dollar and a positive demand outlook. China, a key player in the aluminium market, saw its output rise to 3.515 million metric tons in April, up 4.98% year-on-year. Some aluminium smelters in Yunnan province continued production resumption, contributing to a daily average output of around 117,200 metric tons. With power supply in Yunnan Province recovering and local capacity steadily resuming, domestic aluminium operating capacity is expected to increase further in May. However, attention is warranted regarding the progress of resumption of remaining production capacities in Yunnan. Despite positive production trends, aluminium inventories in LME-registered warehouses surged to the highest level in more than 2-1/2 years, doubling in less than a week, fueled by commodity trader Trafigura's delivery of 424,000 metric tons of aluminium for financial deals. In monetary policy news, the People's Bank of China (PBoC) injected CNY 125 billion via a one-year medium-term lending facility (MLF) to stabilize the yuan, keeping the interest rate unchanged at 2.50%. The yuan has faced pressure against a strengthening dollar, depreciating by 2% this year due to relatively low yields compared to other economies. Additionally, the PBoC conducted a CNY 2 billion seven-day reverse repurchase operation while maintaining borrowing costs at 1.8%. Technically, the aluminium market experienced short covering, with a 6.69% drop in open interest to settle at 2,427 contracts, while prices rose marginally by 0.4 rupees. Currently, aluminium has support at 236, with a potential test of 233.8 if this level is breached. On the upside, resistance is expected at 240.6, with the possibility of prices testing 243 upon surpassing this level.
 

Trading Ideas:
* Aluminium trading range for the day is 233.8-243.
* Aluminium gains aided by a weaker U.S. dollar and bullish demand outlook.
* China's aluminium output was 3.515 million mt in April (30 days), up 4.98% YoY.
* LME aluminium stocks surge to highest since October 2021


Cottoncandy
Cottoncandy prices saw a modest increase of 0.18% to settle at 56,080, buoyed by strong demand for Indian cotton from countries like Bangladesh and Vietnam. However, the upside was capped by sluggish milling demand amid muted global demand for yarn. Additionally, prospects of a better crop in countries such as Australia added pressure to prices. The International Cotton Advisory Committee (ICAC) projected increases in cotton-producing area, production, consumption, and trade for the next season, 2024-25. Meanwhile, in India, cotton stocks are expected to plummet by nearly 31% in 2023/24, reaching their lowest level in over three decades, due to lower production and rising consumption. This decrease in stockpiles is expected to limit exports from India, the world's second-largest cotton producer, and support global prices. However, it could also squeeze the margins of local textile companies. Looking ahead, for the marketing year 2024/25, India's cotton production is estimated to decrease by 2% to 25.4 million 480 lb. bales, with farmers potentially shifting acreage to higher-return crops. Mill consumption is forecasted to rise by 2%, driven by improved demand for yarn and textiles in major international markets. Additionally, with the recent removal of import duties on extra-long staple (ELS) cotton, imports are estimated to increase by 20%. Technically, the cotton market experienced short covering, with a 3.76% drop in open interest, settling at 358 contracts, while prices increased by 100 rupees. Currently, cottoncandy has support at 55,860, with potential testing of 55,630 if this level is breached. On the upside, resistance is expected at 56,360, with prices potentially testing 56,630. This technical overview suggests a cautiously optimistic outlook for cottoncandy prices in the near term.
 

Trading Ideas:
* Cottoncandy trading range for the day is 55630-56630.
* Cotton gains as demand for India cotton continues to be strong from buyers in countries such as Bangladesh
* U.S. ending stocks projected 1.3 million bales above 2023/24 level
* Global supplies in 2024/25 projected to be higher than previous year
* In Rajkot, a major spot market, the price ended at 27143.15 Rupees dropped by -0.39 percent.


Turmeric
Turmeric prices saw a slight decline of -0.95% to settle at 17,988, primarily driven by profit booking after recent gains, despite farmers holding back stocks in anticipation of further price rises. The prevailing heatwave across the country poses a threat to crop yields, exacerbating the existing supply crunch and supporting prices. The India Meteorological Department's forecast of more heatwave days in May suggests limited respite from the scorching temperatures, further fueling concerns over crop damage. However, upside potential is restrained by profit booking and an increase in supplies towards the end of the harvesting season. Rainfall in southern India was significantly below normal in April, impacting crop growth. The Ministry of Agriculture's estimate indicates a decrease in turmeric production for 2023-24 compared to the previous year. Additionally, price surges have led to demand destruction, with consumers adopting a hand-to-mouth approach. Despite domestic challenges, turmeric-growing regions like Sangli, Basmat, and Hingoli are witnessing increased demand for quality produce, driven by expectations of a rise in sowing area this year. On the export front, turmeric exports for Apr-Feb 2024 dropped by 4.42% compared to the previous year, while imports decreased by 15.36% during the same period. However, there was a notable increase in both exports and imports in February 2024 compared to January 2024, albeit with a year-on-year decline in exports. Technically, the turmeric market experienced long liquidation, with a 0.9% drop in open interest to settle at 17,000 contracts, accompanied by a decrease in prices by -172 rupees. Currently, turmeric has support at 17,822, with a potential test of 17,658 if breached. On the upside, resistance is expected at 18,230, with prices potentially testing 18,474 upon surpassing this level.
 

Trading Ideas:
* Turmeric trading range for the day is 17658-18474.
* Turmeric dropped on profit booking after prices gained as farmers are holding back stocks.
* The current heat wave could severely damage the crop yield, further contributing to the supply crunch.
* The Ministry of Agriculture first advance estimate for turmeric production in 2023-24 is estimated at 10.74 lakh tonnes
* In Nizamabad, a major spot market, the price ended at 17296.45 Rupees dropped by -1.07 percent.


Jeera
Jeera prices surged by 2.85% to settle at 27,830, primarily driven by a slowdown in arrivals coupled with reluctance from stockists and farmers to release their stocks at current prices. This cautious approach led to a tightening of supply, supporting upward price movement. The arrival of about 9.3 thousand tonnes of jeera in major APMC mandies across India in the first week of May, compared to 8.6 thousand tonnes in the prior week, indicated a slight increase but still contributed to supply constraints. Export demand played a significant role in bolstering prices, with expectations of further increases. Global buyers showed a preference for Indian jeera amidst tightening global supplies, driving robust export demand. Additionally, aggressive buying by stockists further supported the market sentiment. The increase in sowing area and favorable weather conditions in major cumin-producing regions of Gujarat and Rajasthan resulted in a significant boost in production. Gujarat alone estimated a record production of 4.08 lakh tonnes, nearly double the production of the previous year. Rajasthan also witnessed a 53% increase in production. This surge in production is expected to lead to a substantial increase in cumin exports, potentially reaching around 14-15 thousand tonnes by February 2024. Technically, the jeera market observed short covering, with a 3.22% drop in open interest to settle at 3,603 contracts, while prices surged by 770 rupees. Currently, jeera has support at 27,130, with potential testing of 26,430 if this level is breached. On the upside, resistance is expected at 28,220, with prices potentially testing 28,610.
 

Trading Ideas:
* Jeera trading range for the day is 26430-28610.
* Jeera prices gained as arrival pace has started slowed down.
* Global buyers preferred Indian jeera with tightening global supplies.
* New arrivals have started in Gujarat since last 20-25 days and new arrivals have started in Rajasthan also since last 15 days.
* In Unjha, a major spot market, the price ended at 28832.15 Rupees gained by 0.82 percent.

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