US Fed move gives push to metals
Multi-month high in global markets on QE3 gold & silver expected to swell, too
Global commodities hit a multi-month high in foreign markets today, after the US Federal Reserve announced a big mortgage-based bond buying programme until the jobs market improved.
While copper hit a four-month high to settle at $8,400.5 a tonne, a rise of five per cent from yesterday, gold and silver also moved up to trade at a six-month high of $1,777.95 an oz and $34.67 an oz in early London trade.
The US Fed said would purchase mortgage-backed securities worth $40 billion a month until the job market outlook improved and inflation remains contained. This would increase the Fed’s holding in long-term securities by $85 billion. It also kept interest rates unchanged, saying it would keep these rates exceptionally low till mid-2015 (earlier it was till 2014-end).
“Metal prices are broadly influenced by the fundamental demand and supply factors and the global liquidity scenario. This is expected to boost investor confidence, thereby causing rise in the risk appetite. This, is turn, might lead to decline in the demand for the low-yielding currency that is the US Dollar Index, supporting an upside in commodities and other riskier assets. This announcement would also bring in a rally in non-ferrous metal prices. Again, tightening of supplies of base metals on account of producers postponing projects and shutting production may support price stability,” said Naveen Mathur, associate director, Angel Broking.
In India, however, globally traded commodities remained resilient due to appreciation in the rupee. Against the dollar, the rupee rose two per cent to close at 54.30, compared to 55.42 yesterday. The appreciation restricted metals from moving in India in line with global markets.
In the spot Mumbai market, however, base metals did move in line with the global markets. Copper surged Rs 6 to close the day at Rs 525 a kg. Following that, nickel and lead moved up by Rs 5 and Rs 2 to Rs 1,080 a kg and Rs 127 a kg, respectively. Tin also moved up by Rs 15 to close at Rs 1,290 a kg.
Copper is set to drive the base metals complex. The red metal might hit $8,700 a tonne before the current year ends. Similar movement can be seen in other base metals.
In Mumbai’s popular Zaveri Bazaar, gold closed with a marginal gain of Rs 200, at Rs 32,200 per 10g. Following the move, silver ended the day with a rise of Rs 1,330, to Rs 63,665 a kg, against Rs 62,335 a kg yesterday.