Global Commodity Market Wrap-Up

Last week, the metals market showed mixed results, with both precious and base metals fluctuating within a narrow range. Gold gained 0.61%, while silver declined by 1.77%. Base metals displayed stability, with copper down 0.88%, lead dropping 3.34%, and zinc edging up by 0.76%. This shift contrasts with the previous week’s more stable performance, as changing investor sentiment and varying demand across different metal sectors influenced the market. The evolving outlook reflects the shifting dynamics that are likely to shape the metals market in the short term.

Last week, natural gas prices surged by 6.07%, propelled by supply shortages and increased seasonal demand. Crude oil prices also rose by 5.73%, though the gains were tempered by lingering market volatility and shifting investor sentiment. In the agricultural markets, U.S. sugar prices diverged from the upward trend, dropping by 5.00%, while other agricultural commodities remained stable. These fluctuations in energy and agricultural sectors highlight the influence of diverse supply-demand factors, as investors continue to navigate a volatile global economic environment, fostering a cautious market outlook with evolving conditions.

Global commodity prices have stabilized near key support levels, shaped by various global factors. Precious metals are holding above critical support, signalling the potential for a bullish trend. In the energy market, natural gas is displaying upward momentum, while crude oil prices are stabilizing around important support zones. Agricultural commodities are showing mixed performance, reflecting varying conditions across the sector. This environment suggests a prudent approach as investors assess the evolving market dynamics, balancing optimism with caution in response to broader economic and geopolitical influences.

The upcoming Micro and Macroeconomic events that may impact market sentiments include an update S&P Global Services PMI, Core Retail Sales, Fed Interest Rate Decision, GDP and Core PCE Price Index.

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 US Coffee March Future (ICE: KCH5) for the next 2-4 weeks duration:

US Coffee March Future (ICE: KCH5)

Price Action and Technical Indicator Analysis: In March, Coffee futures experienced consolidation below a significant horizontal resistance level, accompanied by a bearish candlestick pattern. Despite prices reaching a higher high, they closed below the previous higher high, signalling potential weakness. Leading indicators suggest a move toward the 21-day Simple Moving Average (SMA), which is acting as a key support level, pointing to the possibility of a reversal and a continuation of the bearish trend. The increased trading volume adds further weight to the likelihood of this trend reversal. On the daily chart, a strong resistance level reinforces the negative outlook. Additionally, the Relative Strength Index (RSI) at 61.99, after briefly entering the overbought zone, suggests a potential reversal, with the 21-period SMA providing short-term support.

Now the next crucial support levels appear to be at USc 295.00 and USc 289.00, and prices may test these levels in the coming periods (2-4 weeks).

As per the above-mentioned price action and technical indicators analysis, US Coffee March Future (ICE: KCH5) 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 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 Selling 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 December 16, 2024 (Chicago, IL, USA 00:00 AM (GMT-6). 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.