'Gold to fall further as rupee may recover, crude to consolidate'

Jigar Trivedi

It was a choppy trading week for gold traders. US Fed minutes confirmed rate pause for this year but weekly jobless claims fell to an almost 50 years low and producers price index rose well above forecast, hence dollar strengthened.

Meanwhile, the US showed readiness to begin another round of talks with North Korea hence geopolitical risk reduced. For the entire week, no activity was seen in SPDR gold ETF. Although China's government reported that the country's gold reserved rose for the fourth straight month, the yellow metal depreciated in the week.

The metal market these days is grappling with issues. Already a year-long trade tiff with China is far from getting resolved, International Monetary Fund (IMF) lowered global growth forecast, US threatened EU to impose tariffs on goods, Brexit got delayed by six months and China trade data for March drove the market for metals.

In a fresh bid, the US threatened to impose tariffs on $11 billion of European goods but the EU immediately agreed to talk. Since IMF in its latest global projections lowered 2019 growth forecast to 3.3 percent from 3.5 percent- the lowest since the financial crisis and also marked the third downgrade in six months, the base metals reacted negatively mid-week. Later as the US posted strong economic data, the dollar faltered sharply and industrial metals nosedived.

However, China's March trade data surprised the street with export growing at 14.2 percent against de-growth of 21 percent a month ago. Moreover, the trade balance rose to $32.5 billion against $4.12-billion-rise a month prior. Hence eventually, metals recovered.

Within energy commodities, crude oil surged for another week due to a militant crisis in Libya, which has led to output fall from the OPEC member. Besides, strong Chinese economic data also pushed the prices higher. Even after 41 percent rally in the year so far, bulls have not given up.

Going ahead, during the holiday-shortened week, the trading movement is expected to be muted. Gold has ended at a critical point. Hence, next week empire state & Philly Fed manufacturing index, industrial production and trade balance for March will be closely watched by the traders. Since we expect the Indian rupee to recover in coming week too, the yellow metal may stay weak.

Crude oil's underline fundamentals are strong and favour a rally. Having said that, prices are already in an overbought zone, hence, oil may consolidate in a tight range in the coming week. Lastly, base metals are likely to be positive as China trade data has signalled a robust scenario in China.

The author is Research Analyst- Commodities Fundamental, Anand Rathi Shares & Stock Brokers.

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Original Source: https://www.moneycontrol.com/news/business/markets/gold-to-fall-further-as-rupee-may-recover-crude-to-consolidate-3823691.html