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Today, base metals are trading marginally up by 0.1 to 0.3 percent on the London Metal Exchange in electronic trading While Asian equities have opened on a stronger note and are trading up by nearly a percent due to increased optimism followed by gains in US markets on better than expected earnings reports.
The Chinese economy may avoid hard landing while gains in base metals might remain intact on the back of higher production and consumption expectation from the largest user. Fundamentally, the metals market is at slight deficit as the latest report by the World Bureau of Metal Study indicated the deficit in Copper and Lead markets and may continue to support gains in today’s session.
Even the cancelled warrants have improved in the recently indicating increased downstream demand and may continue to extend gains. Presently, manufacturing and industrial activity is slowly resuming pace and may support small gains in base metals.
From the economic data front, the eurozone current account balance may increase extending gains to the plummeting shared currency of the EU and may extend gains to metals pack.
From US, the weekly jobless claims are likely to remain at a blend and may limit much upside. Existing home sales along with Philadelphia Fed might improve after recent slump and may continue to support gains in the evening session. Therefore, base metals might open on a higher note due to weak opening of the domestic currency and may continue the gaining spree on the back of increased optimism and deficit markets. A slight weakness might be witnessed in the US session due to weak US leading indicators; however, gains might remain intact due to increased demand and improving fundamentals.
Gold prices continued to consolidate in the range mentioned yesterday (1575) amid reluctance of accommodating monetary policy and the continuing eurozone crisis which is reaching a critical stage. Yesterday, comments by German Chancellor Merkel surprised markets when she said that parts of the EU seemed bound to failure.
Gold therefore rose sharply in electronic trading during the Asian session by gaining near 0.50% with Asian equities following rally from the overseas.
Nevertheless, in other news the EU has proposes an economic partnership deal with Japan for free movement of goods and money aligning with the Korean deal last year which kindled exports. In that sense, the euro may maintain its strength at least till the US session. Reports today may also show the US jobless claims have risen after Beige book too reported tepid growth in the labor sector while the Philly Fed manufacturing may continue to remain at a negative zone. The US dollar therefore may come under stress later in the session supporting a rise in gold. Our observation is that gold will stay within a tight range
Silver futures prices have also gained momentum this morning electronic trading off the backs of a rally of global equities and surprising rise in housing starts to the highest level since 2008. The euro may retreat a bit as Spain will be auctioning 3billion euros of bonds today. Silver is expected to benefit from both precious metals and industrial metals in today's trading.