Trade with Commodities: Zinc up 6.4%, may remain bullish

Saturday, May 2, 2009

Zinc up 6.4%, may remain bullish

INDICATIONS of revival of economy across US, Asia and Europe and weakness in the dollar supported the zinc prices which moved up by 6.4% against previous week. The price closed at $1,507 per tonne after making a high of $1525 on the London Metal Exchange (LME). On MCX zinc price of May contract gained by 6.5% and closed at Rs 74.85 per kg.
    Reena Walia, research analyst at Angel Commodities said that in the short-term zinc prices could trade higher but the upside could be capped by the release of the stress tests results of the US banks in the next week. "However, we expect the zinc May contract on the MCX to trade in the range of Rs72 - Rs77.50 in the coming week," she said.
    Kunal Shah from Nirmal Bang Commodities maintains that zinc will remain bullish following the aggressive production cuts been taken by one of the largest producer of the metal in Russia and Belgium. "Zinc prices on LME will soon touch $1575 and MCX May contract will touch Rs 77.50-Rs 78 in the coming week," he said. Consumer confidence in the US improved in April to 39.2 from 26.9 the previous month. The measures of US manufacturing and consumer confidence last month unexpectedly jumped to their highest levels since the credit crisis intensified in September, indicating the economy is on the road to recovery.
    Similarly the encouraging macro economic data from Asia and Europe shows some revival of economic activity. Even the Chinese official Purchasing Managers Index (PMI) for April rose to 53.5 in April from 52.4 in March, marking its fifth consecutive monthly increase. Optimism that the recession could be near its end helped the entire base metals market.
    With these positive triggers on the improvement of economy across the countries, both the dollar and yen fell against the most major currencies which supported the commodity prices. Also the upward movement in the equity market and falling inventories on LME pushed the prices. LME inventories fell down by 3.4%.