Zinc on MCX settled up 0.85% at 226.6 as support seen after a raft of Chinese data signalled Beijing’s recent stimulus drive might be paying off. Zinc inventories in LME-approved warehouse shot up 7.5 percent from a day earlier to near a three-week high of 56,125 tonnes, latest data showed.
On-warrant zinc stocks in warehouses tracked by ShFE also marked a 7-percent daily increase to 51,976 tonnes. As the monthly delivery of cargoes under LME contracts approaches, the backwardation structure on LME zinc rapidly widened, resulting in higher social inventories. High inventories and possible restarts of idle capacity weakened the inclination to go long.
China's central bank said on Monday that it would strengthen coordination between monetary, fiscal and other policies to keep growth stable and forestall risks. The People's Bank of China (PBOC) will continue its counter-cyclical adjustments while fine-tuning monetary policy, it said in a statement issued after a quarterly meeting of the monetary policy committee. The central bank will not adopt strong stimulus policies, the statement added.
PBOC has continued to skip open market operations for 18 consecutive trading days, citing abundant liquidity in the banking system. Despite a dovish shift in the Federal Reserve’s monetary policy outlook, the dollar remained firm on upbeat US economic data. Technically market is under short covering as market has witnessed drop in open interest by -2.42% to settled at 4837 while prices up 1.9 rupees, now Zinc is getting support at 225.4 and below same could see a test of 224 level, And resistance is now likely to be seen at 227.7, a move above could see prices testing 228.6.
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