Global Commodity Market Wrap-Up

Last week, commodities prices continued southward movement amid concerns over recession fears and the rising US dollar index. Gold prices have declined and settled with a weekly loss of 1.54% while silver prices declined sharply making a new 52-week low and settled at a weekly loss of 7.23%. Base metals also traded in a weak momentum. Copper and Zinc prices have witnessed a weekly decline of 4.07% and 9.73%, respectively while Lead price has shown some respite and settled with a weekly gain of 1.34%.

On the Energy front, Crude oil prices settled at a moderate weekly gain of 0.75%. However, Natural gas prices declined sharply and settled at a weekly loss of 9.73%. Agricultural commodities prices have shown a mixed trend. Notably, Soybean and Corn prices witnessed 0.95% and 0.57% weekly gains respectively. However, Sugar prices declined last week and settled at a weekly loss of 1.31%.

In the recent week, primarily all the commodities prices are showing weakness amid increasing US dollar prices and recession fears. Precious metals prices are unable to pick up an upside momentum and still trading in a short-term downtrend, while Base metals are dragging down towards new 52 weeks’ lows due to weak demand. On the energy front, Crude oil and Natural gas prices are extending weakness this week. The agricultural commodities basket is also showing some correction from higher levels.

The upcoming macroeconomic events that may impact the market sentiments include an update on FOMC Meeting Minutes, Unemployment Claims, Unemployment Rate, and the USDA WASDE report released monthly.

Having understood the global commodities performance over the past one week, taking cues from major global economic events, and based on technical analysis, noted below are recommendations with the generic insights, entry price, target prices, and stop-loss for Silver September Futures (COMEX: SIU2) and Zinc August Futures (LME: CMZNQ22) for the next 1-2 weeks’ duration:

Silver September Futures Contract (COMEX: SIU2)

Price Action and Technical Indicator Analysis:

COMEX Silver September Futures' prices recently broke a descending channel pattern by downside with good volume support and sustaining above the breakout level for the past two weeks. Prices are currently hovering below its 21-period and 50-period SMA which further supports a negative stance. The leading indicator RSI (14-period) is trading near an oversold region and currently trading at ~30.85 levels, supporting a weak stance. Now the next crucial support levels appear to be at USD 17.90 and USD 16.17, and prices may test these levels in the coming sessions (1-2 weeks).

As per the above-mentioned price action and technical indicators analysis, Silver September Futures (SIU2) is looking technically well-placed for a ‘Sell’ rating. Investment decision should be made depending on an investors’ appetite on upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered. Technical summary of ‘Sell’ recommendation is as follows:

LME Zinc August Futures (LME: CMZNQ22)

Price Action and Technical Indicator Analysis:

On a monthly chart, LME Zinc August futures’ price broke an upward sloping trend line by downside and the prices are sustaining below the breakout level for the past two months. The prices are also trading below its 21-period SMA, which also supports the bearish stance. The momentum oscillator RSI (14-Period) is trading at ~48.99 levels further indicating weak price momentum. Now the next crucial support level appears to be at USD 2770.00, and USD 2591.01 and the prices may test these levels in the coming sessions (1-2 weeks).

As per the above-mentioned price action and technical indicators analysis, Zinc August Futures (CMZNQ22) is looking technically well-placed for a ‘Sell’ rating. Investment decision should be made depending on an investors’ appetite on upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered. The summary of 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 

Investment 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 1-2 weeks’ time frame. This may be looked at by Investors with sufficient risk appetite looking for returns within short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and fundamental performance of the commodities has not been considered in the decision-making process. Other factors which could impact the commodity prices include market risks, regulatory risks, interest rates risk, currency risks, and social and political instability risks etc.

Entry Price: For the given recommendation(s), the Entry Price is assumed to be at or above/ at or below a certain level. However, a slight deviation in the 'Entry Price' can be considered depending upon the upside/downside potential expected and taking into consideration the Target levels indicated. For example: - An Investor can consider entering the commodity at or above/ at or below a certain range (1%-1.5%) from the Entry Levels recommended depending upon the potential upside/downside expected. Therefore, there can be a slight deviation between the ‘Entry Price’ and the ‘Current Market Price (CMP)’. The ‘Entry Price’ indicated above may or may not be same as the ‘CMP’ shown in the price chart.

Note 1: Investors 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 2: 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 downtrend may take a pause backed by demand or buying interest. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest. 

Stop-loss: In general, 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 June 22, 2022 (Chicago, IL, USA 01.57 AM (GMT -5). The reference data in this report has been partly sourced from REFINITIV. 

Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors 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.