Bears loosen grip, but base metal rally may not have legs
KOLKATA: The rally in base metal prices in the last two days when prices increased 4-5% may not sustain for long though the bigger bear cycle looks to have reversed, analysts say. They expect broader consolidation in metals to continue.
“The kind of rally seen in last two days is not expected to extend for long as it has been built primarily on two factors China resuming trading on Wednesday after a short break, and secondly the expectations of positive talks between US president Donald Trump and Chinese president Xi Jinping," said Himanshu Gupta, chief market strategist at Karvy Commodities.
Nickel prices have gone up by 5% in last couple of sessions to touch Rs 670 per kg while copper prices have gone up by 4.05% during the same period. Aluminium continues to remain strong and has appreciated 8% since the beginning of the year.
Kishore Narne, head of commodity and currency at Motilal Oswal Commodities, said the rally should continue for at least a month as the fundamentals are strong.
The entire base metals pack got a shot in the arm as the Chinese government announced last Saturday that it would create the Xiongan area in Hebei province modelled in the way Shenzhen and Shanghai's Pudong was built. This created optimism among investors regarding Chinese economic outlook.
London copper eased on Thursday as trade was thin ahead of a meeting between the leaders of China and the United States, but Chinese demand underpinned prices as the seasonally strongest quarter for industrial metals gets underway. In Asia, investors were paring risk before a potentially tense meeting between Trump and Jinping later on Thursday where China's trade surplus will be high on the agenda.Analysts believe that data expected in coming weeks would reveal good economic growth in China.
This may result in higher metals demand during the second quarter when consumption typically peaks in China, they said. Gupta of Karvy Commodities said broader consolidation in metals is likely to continue and any immediate sustained rally is not expected.“However, base metals are gradually coming out from the bear cycle and in the next few quarters prices may go up," he said.
Despite overall global uncertainty, base metals are shining bright citing strong manufacturing data from Europe and Asia.
“The kind of rally seen in last two days is not expected to extend for long as it has been built primarily on two factors China resuming trading on Wednesday after a short break, and secondly the expectations of positive talks between US president Donald Trump and Chinese president Xi Jinping," said Himanshu Gupta, chief market strategist at Karvy Commodities.
Nickel prices have gone up by 5% in last couple of sessions to touch Rs 670 per kg while copper prices have gone up by 4.05% during the same period. Aluminium continues to remain strong and has appreciated 8% since the beginning of the year.
Kishore Narne, head of commodity and currency at Motilal Oswal Commodities, said the rally should continue for at least a month as the fundamentals are strong.
The entire base metals pack got a shot in the arm as the Chinese government announced last Saturday that it would create the Xiongan area in Hebei province modelled in the way Shenzhen and Shanghai's Pudong was built. This created optimism among investors regarding Chinese economic outlook.
London copper eased on Thursday as trade was thin ahead of a meeting between the leaders of China and the United States, but Chinese demand underpinned prices as the seasonally strongest quarter for industrial metals gets underway. In Asia, investors were paring risk before a potentially tense meeting between Trump and Jinping later on Thursday where China's trade surplus will be high on the agenda.Analysts believe that data expected in coming weeks would reveal good economic growth in China.
This may result in higher metals demand during the second quarter when consumption typically peaks in China, they said. Gupta of Karvy Commodities said broader consolidation in metals is likely to continue and any immediate sustained rally is not expected.“However, base metals are gradually coming out from the bear cycle and in the next few quarters prices may go up," he said.
Despite overall global uncertainty, base metals are shining bright citing strong manufacturing data from Europe and Asia.
