The Hindu Business Line : Metals go on correction mode

After a sustained rally, metals basket showed early signs of a correction on Tuesday. Market analysts, however, believe that any such correction would be short-lived. The entire basket — especially precious metals — is enjoying a positive bias both technically and fundamentally.

Expectations are specifically high on gold. The near month contract at MCX was ruling at Rs 9,700 level during the day as against the previous closing at Rs 9,837.

While technical studies indicate that gold may shed another Rs 60 to 70 in a day or two, Mr Naveen Mathur, Head of Commodities, Angel Broking, feels that fundamentals are in favour of an upward movement of gold.

The recovery of the US economy and demand from China may offer strong support to metals and precious metals, Mr Mathur said, adding he was not so confident on the movement of silver in the short term.

Having gained over Rs 1,100 in the last five days, the near month contract on silver was ruling roughly Rs 250 lower than the previous close during the day.

"Silver is following a particular pattern since April 2006 when it touched the all time high of Rs 23,148," says a technical analyst with Kredent Commodities.

According to him, despite intermittent falls, the precious metal has always been strong enough to bounce back. "We are not expecting any major correction in silver at this juncture," he says.

According to technical analysis by Kredent, in base metals segment, nickel is going strong. Despite an intra-day fall, there is an upside bias in aluminium. Upside bias is also witnessed in copper and zinc for the short term. However, both the metals look weak in terms of long-term (three to four months) prospects.

Mr Mathur, however, is extremely hopeful that fresh demands from China offers sufficient strength to base metals.