Commodity market outlook: Gold price headed for second monthly drop in three

Updated: Jun 1 2014, 16:32pm hrs
GoldGold is headed for a second monthly drop in three months while; Silver is down for third month.
Precious metal: Precious metals remained in bearish trend for the entire week mainly due to improving U.S. economy and stronger U.S. dollar which reduced an investment-hedge appeal of precious metals. Gold fell to $ 1251.56 an ounce which is lowest near to 16-month low of $ 1251.10 an ounce . Silver also fell to $ 18.91 an ounce.

Gold is headed for a second monthly drop in three months while; Silver is down for third month. Gold is down nearly 3 percent for the week and Silver down by 2.67 percent for the week, under pressure from stronger equities and a firmer U.S. dollar. But physical demand for the metals has failed to pick up despite the price drop.

Over all, MCX Gold August future is in weak on charts and sustaining around lower levels near July 2013 levels. For the coming week 24900/24400 will act as a major support whereas 26600/27100 will act as a major resistance level in MCX Gold August future. For the next week in MCX Gold, trader can use sell on higher level strategy, if MCX Gold August future sustains below the levels of 25500 then it could test the levels 25250/25000.

Technically, MCX Silver July futures is in weak on charts and sustaining around lower levels. For the coming week 41400/43000 will act as major resistance levels where as 38500/37000 will act as major support in MCX Silver July futures. For the next week in MCX Silver futures, traders can use sell on higher level strategy, if MCX Silver July futures sustains below 39600 then it could test the levels of 38800/ 38000.

Energy: Crude oil future edged lower last week as a rise in U.S. inventories weighed on the commodity prices, while markets were also digested disappointing U.S. economic growth report. Investors continued to focus on developments in Ukraine-Russia conflict. Crude Oil prices also traded higher last week on concerns that the Ukraine-Russia conflict will disrupt crude shipments from Russia. Next week we can expect Crude oil price to trade lower as Petro Poroshenko elected as Ukraine's new president over the weekend with the expectations that he will stabilize the country despite the ongoing crisis with neighbouring Russia, which can lead the oil prices to dip as well.

For the coming week 5930/5640 will act as major supports levels whereas 6200/6450 will act as major resistance in MCX Crude oil June futures. For the next week, trader can use sell on higher level strategy, if MCX Crude June future sustain below 6100 levels then it could test the levels 6000/5920.

Base Metal: Copper fell from an 11-week high in London on signs of slowing economic growth in China and the U.S., the biggest users of the metal. In New York, Copper futures for delivery in July fell 1.65 percent to weekly loss at $3.1275 a pound on the COMEX. Weak growth in China's GDP for the first quarter of 2014 coupled with downward revision of China's GDP growth forecast, has raised concerns over the demand prospects of the metal. China's PMI Index is below 50 which is also suggesting contraction in china's manufacturing sector.

MCX Copper June future is in consolidation and also sustaining around lower levels. For the coming week, it could face major resistance of 420/432 whereas 395/383 could be a major support in MCX Copper. For the next week trader can follow sell on higher levels strategy, if MCX Copper June future sustain below 408 levels then it could test the level of 401/392.

By Vivek Gupta, Director Research, CapitalVia Global Research Limited