Zinc prices found support on the soft dollar and China stimulus hopes. What next?


Zinc prices paused its recent losses, and traded slightly positive, supported by a soft U.S. dollar and expectations of more stimulus in top consumer China.

The prices turned positive slightly as the US Dollar Index backed further from last week’s 11-month peaks and bond yields, benchmarked to the U.S. 10-year Treasury note, retreated from the highest levels since 2007 as Fed officials have hinted that rate hikes are over in the meeting minutes released yesterday.

Most Federal Reserve policymakers agreed that one more rate hike would be “appropriate” and emphasized the need to keep interest rates higher for longer as inflation continues to trend well above the central bank’s 2% target, the Fed’s September meeting minutes showed.

Chinese policymakers are weighing a new round of stimulus with the issuance of at least 1 trillion yuan ($136.95 billion) of additional sovereign debt for spending on infrastructure, said a Bloomberg report.

However, upside momentum kept in a range as according to the statement by International Lead and Zinc Study Group, the global refined zinc market is headed for a surplus of 248,000 metric tons this year, compared with a previously projected deficit of 45,000 tons due to lower than anticipated demand.

The world demand for refined zinc is now seen increasing by 1.1% to 13.59-million tons in 2023, less than 13.80 million tonnes projected in April amid tight monetary conditions.

At the same time, the situation in Country Garden has once again triggered market concerns about consumption, and zinc prices met resistance.

The world demand for refined zinc is now seen increasing by 1.1% to 13.59-million tons in 2023, less than 13.80 million tonnes projected in April amid tight monetary conditions.

On the other hand, the support for the metal comes from hopes for China’s economic recovery after the positive PMI data. Also, expectations of reduced production from Europe and Australia limited the decline.

Technical Outlook

 Since 29 September 2023 Zinc prices have been lower.  Prices retreated from the peak of 233.00. Prices touched a two-week low 220.40, and settled at 221.30 yesterday.

On the above chart, prices back from its multiple support and forming an indecisive candle stick which is indicating an indecision among traders.  Adding to this, 61.8% Fibonacci Retracement will act as a crucial support and a break below it only prices may retreat towards 218-215.50.00.

Alternatively, prices may consolidate above 220.00 and could retest immediate resistance 224.80-230.00 in near future.