Copper, zinc soar
It turned out to be a dull on Friday with volatility seeping towards evening after an overnight fall in the Asian session. The sharp downturn in bullion and base metal markets on Thursday evening was in response to key fundamental news in the US economy.
With the dumbing down of tensions in the Middle East and recession of tropical storm Debby, crude oil and natural gas prices had seen a distinct fall throughout the week. But fears of a new tropical storm Ernesto in the Caribbean and reports of three workers missing in Port Harcourt, the center of the Nigerian oil industry and site of several kidnappings of foreign workers in recent weeks, pushed up crude oil prices to its highest in more than a week and natural gas by almost 5%.
US durable goods orders dropped by 2.4% in July, which was announced on Thursday. Such reduced consumption, along with reports of dropping new home sales, served to allay inflation fears, and induced bullishness for the dollar, which was simultaneously mirrored by bearishness for gold and base metals.
Gold fell by 1% on Thursday evening immediately following the announcement, to Rs 955 per kg. Silver too fell in tandem plummeting by almost 2%.
However, rising crude oil prices impeded bullionâ€™s continued plunge, as the market tried to correct the falling gold-crude oil ratio, which had decreased from 8.58 to 8.51 overnight. The empirical stable average ratio that the market supports hovers within a range of 12 to 15. Also abetting this upsurge in gold was the selling off of dollars.
Base metals including copper gained support on Friday amidst fears that the strike in the worldâ€™s biggest copper mine Escondida in Chile, may spread to other locations as well. Zinc, however, wasnâ€™t affected as much and continued to move steadily upward, trading at Rs 157 per kg levels.
Courtesy: Geojit Commodities