Global Commodity Market Wrap-Up

Last week's downward trend in metal prices continued, with significant profit booking observed. Gold remained relatively resilient, showing a minor loss of -0.89%, whereas silver experienced a more pronounced decline of -3.29%. Base metals mirrored this negative trend, with copper dropping by -2.93% and zinc by -7.46%. Notably, lead deviated from this pattern with a decline of -3.68%. This contrasting movement, diverging from the previous week's falling prices, reflects a nuanced blend of nervousness, optimism, and investor confidence in the metals market.

Last week, Natural Gas prices maintained their upward momentum, registering a noteworthy gain of 12.55%. This rebound marks a substantial shift from the previous week, underscoring improved market sentiment and demand dynamics. In contrast, Crude Oil prices recorded a notable increase of 1.97%, signaling growing confidence in the market. Furthermore, US Sugar witnessed a robust gain of 3.83%, bolstering positive momentum in agricultural commodities.

Global commodities are experiencing mixed sentiments, reflecting diverse global developments. Precious metals are hovering near support levels with a slight negative bias. In the energy sector, Natural Gas has exhibited robust momentum but is undergoing some correction in response to current market conditions, while Crude Oil prices are maintaining support levels and have risen accordingly. Agricultural commodities, however, are following a neutral trajectory at present.

The upcoming Micro and Macroeconomic events that may impact market sentiments include an update on the PPI, Core Retail Sales, US Jobless Claims data, Natural Gas Storage and FOMC Monetary Policy Reports.

Having understood the global commodities performance over the past week, taking cues from major global economic events, and based on technical analysis, noted below is the recommendation with the generic insights, entry price, target prices, and stop-loss for Natural Gas August Future (NYMEX: NGQ24) for the next 2-4 weeks duration:

Natural Gas August Future (NYMEX: NGQ24)

Price Action and Technical Indicator Analysis:

In the natural gas futures market, the current sentiment is decidedly bearish as July prices persistently struggle against a major resistance level. This ongoing battle is exerting downward pressure on the commodity price index. From a technical standpoint, the situation looks increasingly precarious. Prices are stubbornly hovering near the resistance level, signaling a lack of strength to push through. The formation of a solid top on daily charts suggests a significant weakening of resistance levels, further reinforcing the bearish outlook. The Relative Strength Index (RSI) stands at 63.52, indicating an absence of substantial upside potential and potentially signaling an overbought condition. Moreover, the current price is trading above both its 21-period Simple Moving Average (SMA) and 50-period SMA, which could serve as formidable support points in the near future.

Now the next crucial support levels appear to be at USD 3.01 and USD 2.98, and prices may test these levels in the coming sessions (2-4 weeks).

As per the above-mentioned price action and technical indicators analysis, Natural Gas August Future (NYMEX: NGQ24) is looking technically well-placed for a ‘Sell’ rating. Investment decisions should be made depending on an individual’s appetite for downside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. Technical summary of the ‘Sell’ 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

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 a 2-4 weeks’ time frame. This may be looked at by Individuals with sufficient risk appetite looking for returns within short investment duration. The investment recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the commodities has not been considered in the decision-making process. Other factors which could impact commodity prices include market risks, regulatory risks, interest rates risk, currency risks, and social and political instability risks etc.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: Individuals 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 3: 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 a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: 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 13, 2024 (Chicago, IL, USA 2:00 AM (GMT-5). The reference data in this report has been partly sourced from REFINITIV.

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