Commodities market mixed as gold, natural gas fall, crude gains; US debt ceiling crisis supporting gold prices

By Saumil Gandhi

Mixed trade seen in the commodity market during the last week. Bullion prices recovered from heavy loss on the last trading day of the week, still for the week prices closed in red. Comex spot gold settled lower by 1.64% while silver price declined by 0.49% in the previous week. In the energy space, crude oil prices posted a first weekly gain after four straight weeks of decline. A rally in crude oil prices on the back of optimism the US would resolve its debt-ceiling impasse triggered broad gains in financial markets, offsetting a bearish US oil inventory report.

While natural gas prices surged more than 14% last week as weekly storage data came lower than expected. Additionally, natural gas prices supported by supply concern due to lower exports from Canada, wildfires kept gas exports from Canada near a 25-month low.

Gold prices witnessed a sharp selloff in the mid of the week and Comex gold price fell to an eight-week low of $1955 per ounce after positive progress on the US debt ceiling crisis. President Joe Biden expressed confidence that negotiators would reach an agreement to avoid a default. Additionally, renewed dollar strength has also been weighing on gold, while an uptick in US Treasury yields was posing another headwind for the non-yielding metal.

Money managers have decreased their bullish gold bets by 14,837 net-long positions to 131,789 as per weekly CFTC data on futures and options showed. MCX gold June contract declined by 0.83% to Rs 60,379 per 10 grams in the previous week. However, on Friday gold prices trimmed their earlier loss after US debt-ceiling talks reached a stalemate and in his speech, US Federal Reserve Chair, Jerome Powell signaled rates may not need to rise.  

Comex Silver price settled lower by 0.49 % in the previous week. MCX Silver July future price recovered and closed marginally higher by 0.37% at Rs 73,321 per 1 kg.  Money managers have decreased their bullish silver bets by 13,726 net-long positions to 13,443, as per weekly CFTC data on futures and options showed.

Looking forward, we expect gold price to be influenced by the progress of the ongoing US debt ceiling crisis. The risk of a US debt default is bigger than it’s ever been, threatening to tip global markets into uncertainty. On the technical front, Comex gold has immediate support at $1955 per ounce. If the price breaks this support, then the fall will extend to $1923/$1910 level. A recovery in price is likely to see towards $1995/$2019 per ounce until it holds above $1955 per ounce. MCX Gold June futures has support at Rs 59,540/59,080 per 10 grams and resistances at Rs 60,750/61,300 per 10 grams. Comex Silver first support at $23.05 below that price, should retest at $22.80 level and having resistances at $24.70/$25.75 per ounce. MCX Silver July future price find supports at Rs 72,400/71,380 per 1kg and face resistances at Rs 75,400/76,500 per 1 kg for the week.

(Saumil Gandhi, Senior Analyst (Commodities), HDFC Securities. Views expressed are author’s own. Please consult your financial advisor before investing.)

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