Global Commodity Market Wrap-Up

Last week started off with a promising trajectory across commodity markets, with prices opening higher. However, this optimism was short-lived as various factors, including news related to base metals and economic data from the US, triggered a significant correction. In the precious metals sector, gold prices saw a notable decline of -3.43%, while silver prices also saw a decrease of -2.43%. This downward movement suggests a shift in investor sentiment and potential profit-taking after the initial price surge. Base metals were similarly affected, with copper prices dropping by -3.33%. Lead on the LME prices managed to edge up slightly by 0.44%, and Zinc prices also showed a modest increase of 0.51%. These modest gains amidst broader declines could be attributed to specific market dynamics or supply-demand factors unique to each metal. Overall, while there was a correction in gold and base metal prices due to external factors, the slight uptick in Lead and Zinc contributed to maintaining some bullish sentiment in the market. Investors will likely continue to monitor developments closely, adjusting their strategies accordingly to navigate the evolving commodity landscape.

In the energy sector, both Light Sweet Crude Oil and Natural Gas on the NYMEX prices experienced declines, with Crude Oil dropping by -2.34% and Natural Gas by -0.57%. This suggests concerns over energy demand or supply dynamics impacting prices.

Overall, last week's commodity market reflected a mixed picture, with significant declines in precious and base metals countered by some resilience in agricultural commodities. Investors will likely continue to monitor market developments closely to assess potential opportunities and risks in the coming weeks. Precious metals are currently trading above resistance levels with a slightly bullish bias after a correction as well. In the energy sector, Natural Gas and Crude Oil prices are testing the support level at these prices. Agricultural commodities are on a bullish to upward trajectory.

The upcoming Micro and Macroeconomic events that may impact market sentiments include an update on the US Jobless GDP ISM Manufacturing, Chicago PMI data and JOLTs job opening.

Having understood the global commodities performance over the past week, taking cues from major global economic events, and based on technical analysis, noted below is the recommendation with the generic insights, entry price, target prices, and stop-loss for Copper July Future (LME: CMCUN24) for the next 2-4 weeks duration:

Copper July Future (LME: CMCUN24)

Price Action and Technical Indicator Analysis:

The copper futures market is undergoing a significant transformation, particularly with the notable price surge observed in July. The disruption caused by the halt in production by Chinese miners initially led to a downward trend in prices, but it appears to have set the stage for potential gains in the future. The Relative Strength Index (RSI) reading of approximately 60.83 indicates the likelihood of further upward movement, contributing to a positive outlook for the market. Moreover, the current price trading above both its 21-period and 50-period Simple Moving Averages (SMAs) suggests a strong technical support base, which could facilitate continued upward momentum. In summary, these factors collectively paint a picture of a market with promising growth potential and a conducive trading environment for investors.

Now the next crucial resistance levels appear to be at USD 10900.00 and USD 11010.00, and prices may test these levels in the coming sessions (2-4 weeks).

As per the above-mentioned price action and technical indicators analysis, Copper July Future (LME: CMCUN24) is looking technically well-placed for a ‘Buy’ rating. Investment decisions should be made depending on an individual’s appetite for downside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. Technical summary of the ‘Buy’ recommendation is as follows:

Upcoming Major Global Economic Events

Market events occur on a day-to-day basis depending on the frequency of the data and generally include an update on employment, inflation, GDP, WASDE report, consumer sentiments, etc. Noted below are the upcoming week's major global economic events that could impact the commodities prices:

Futures Contract Specifications

Disclaimers

Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.80:1.00), however, returns are generated within a 2-4 weeks’ time frame. This may be looked at by Individuals with sufficient risk appetite looking for returns within short investment duration. The investment recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the commodities has not been considered in the decision-making process. Other factors which could impact commodity prices include market risks, regulatory risks, interest rates risk, currency risks, and social and political instability risks etc.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: Individuals can consider exiting from the commodity if the Target Price mentioned as per the Technical Analysis has been achieved and subject to the factors discussed above.

Note 3: How to Read the Charts?

The Green colour line reflects the 21-period moving average while the red line indicates the 50- period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the commodity. Commodity with high volumes is more liquid compared to the lesser ones. Liquidity in commodity helps in easier and faster execution of the order. 

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Risk Reward Ratio: The risk reward ratio is the difference between an entry point to a stop loss and profit level. This report is based on ~80% Stop Loss of the Target 1 from the entry point.

The reference date for all price data, volumes, technical indicators, support, and resistance levels is May 29, 2024 (Chicago, IL, USA 3:47 AM (GMT-5). The reference data in this report has been partly sourced from REFINITIV.

Note: Trading decisions require a thorough analysis by individuals. Technical reports, in general, chart out metrics that may be assessed by individuals before any commodity evaluation. The above are illustrative analytical factors used for evaluating the commodity; other parameters can be looked at along with additional risks per se.