Metals hit new highs, poised for short-term correction

Having touched new highs overnight, the international and the domestic prices of most metals are due for a correction in the short term, traders and analysts said.

Market players are, however, bullish on most metals in the medium to long term given the huge demand-supply mismatch, which has been on an uptrend as the fastest-growing economies like China and India are showing better prospects.

Besides, the rising prices of all precious metals have hit the domestic physical demand for these metals.

Last night, spot gold prices touched a fresh 25-year high of $575 an ounce, spot silver a new 19-year high of $9.91 an ounce and spot platinum an all-time high of $1,083. The London Metal Exchange copper three-month futures surged over $150 a tonne to breach the psychologically crucial $5,000 a tonne mark to end the day at $5,035 a tonne.

Copper prices rose to an all-time high of $5,040 a tonne led by investment funds' buying. While a correction is imminent now, market players are expecting an upward trend to continue for some time more.

Copper contract can now see a downward movement to the $4,900 level and then surge again towards $5,100, said a Mumbai-based trader.

"We are expecting a dip in prices after $5,000. The spread between near-month and far-month prices of copper (on the LME) shows near term pressure on copper is easing. However, on the longer term, it is likely to move up further following high costs of oil, raw materials, and mining and mining-related equipment constrains," said Si Kannan, a senior analyst with Sharekhan Commodities.

The yellow metal began losing its glitter soon after touching the $575 an ounce mark. Market players put this to nervousness in the market ahead of various US data like non-farm payrolls, unemployment rate, ISM non-manufacturing, factory orders and durable goods data.

"Volumes are low and buying is minimal. There is a possibility that it might dip ahead of weekend on profit taking," said a Dubai-based trader.

Kannan said, "If the data supports gold, it can move up in excess of $580, and any close over that is $600 an ounce. As of today, gold is undervalued on a relative basis to silver. In the coming days, gold is more likely to outperform silver. However, if the data is good for the dollar, gold may see $565."

Silver has got enormous support not only from rising gold prices but also a surge in copper prices. Platinum prices increased in line with soaring gold prices.

Silver is a by-product in copper mining and over the last few years, its industrial usage has gained more significance over its investment purposes. Demand for silver and platinum has gained ground in China, Japan and Turkey over the last two years, and this is expected to see a further uptrend, said another trader.