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To start off a new week, as the month ends, base metals are trading down by 0.13 to 0.41 percent except Copper at LME electronic platform supported by weak industrial production from Japan. However, gains in Copper have remained intact on increased hopes of policy changes later during the session by the ECB.
Fundamentally, manufacturing and industrial activity has remained weak, may continue to support stockpiling of inventories, and may weigh on gains.
This morning Japan reported a significant drop in Industrial Manufacturing, well below market expectations. Further, the Chilean unit of Anglo American has increased its Copper output by 14 percent compared to last year indicating increased supply and may continue to support downside.
Even the Chinese officials, after implementing successive easing is the last couple of months have revised the norms for qualified foreign institutional investors to boost its credit driven economy and may prevent hard landing. Markets would eye the European bourses, where the troika would discuss with Greece for the bailout fund of 30 billion Euros while at another event the ECB would meet with the Fed officials to discuss regarding the future of the shared currency Euro. Though, the outcome of these events is likely to remain weak and may further weigh on the 17-nation shared currency as it is already trading down by 0.23 percent against the greenback, metals may not fall drastically on hopes of increased easing later during the week. From the economic data front, the Euro-zone confidence figures for the month of July are likely to remain weak on the back of rising bond yields and deteriorating economic activity and may continue to weaken base metals. While the Dallas manufacturing from US may also grow at a feeble pace and may further weaken base metals during the evening. Therefore, base metals may open on a stronger note after Friday’s gains; however, the gains may subtle on the back of increased imposition of austerity to Greece and lack of action by the ECB.
On the other hand, precious metals are trading strong this morning. Gold has added some points to its prior closing as Asian equities are also extending gains from last week amid hope of European leaders to signal stronger steps to rein in the sovereign premia. Gold and silver are also adding as markets shift to the FOMC meeting beginning Tuesday. Bookmakers are giving the odds at 40% for monetary stimulus at this meeting and 65% at the September meeting, supporting gold and silver.
Market anticipation will be remaining high regarding Fed meet and ECB decision.
However, Treasury Secretary Timothy Geithner will meet ECB president later today. While Draghi’s comment sparked optimism in the market, Geithner is reluctant to leave any concession for Greece. This battle might keep Euro under strain for a while but the heightened optimism is likely to stay intact ahead of Fed and ECB decision at the mid week. Said above, we recommend staying long for the metal from lower levels.
Silver futures prices have also gained a little this morning supported by strong Asian equities. Silver is expected to hold its current price as industrial metals are not supportive in today's session.