Zinc Prices Witness Growth Due to Weaker U.S. Dollar and Short Seller Exit

Zinc has recently concluded its trading session with a modest 0.21% upswing, settling at a closing price of 214.75. This upward momentum can be attributed to the weakening U.S. dollar index, a significant factor that tends to bolster commodity prices, including zinc. Additionally, the departure of short sellers from the market contributed to the positive price movement. These dynamics reflect the complex interplay between market forces and investor sentiments that influence commodity trading.

The cumulative global zinc surplus for this period amounted to 370,000 metric tons, a substantial increase from the surplus of 241,000 tons recorded during the same period in the previous year. This highlights a significant change in the global zinc market's equilibrium, potentially affecting price trends and market behavior.

The global economic context also plays a significant role in shaping the trajectory of zinc prices. The Purchasing Managers' Index (PMI) in the eurozone, a key indicator of economic activity, exceeded expectations by reaching a value of 43.7 in August. While this figure remains below the threshold indicating economic prosperity, it signifies a slight improvement from previous levels.

Conversely, the PMI data from the United States revealed a weakening trend, contributing to market speculation about the Federal Reserve's future actions. The data indicated a potential slowdown in economic growth, fueling expectations that the central bank might adjust its approach to interest rate hikes. These anticipations range from halting the rate hikes to potential interest rate cuts, and they underscore the delicate balance between economic indicators and policy decisions that influence market trends.

A noteworthy development in the zinc market involves Citibank's strategic maneuvering. The bank acquired significant quantities of zinc on the London Metal Exchange (LME) and arranged to store the metal in LME-approved warehouses. While the precise quantity of zinc purchased by Citibank remains undisclosed, the impact on zinc stocks is evident. Zinc stocks in LME warehouses situated in Singapore surged by an impressive 54% over a span of two days. This surge resulted in zinc stocks reaching a total of 141,750 metric tons, a level not seen since March 2022. Such significant moves by major financial institutions underscore their role in shaping commodity markets.

In terms of price dynamics, zinc currently finds support at 213.4. A breach of this level could potentially lead to a test of 212.1, indicating a potential downward movement in prices. On the other hand, resistance is anticipated around 215.8. If zinc prices manage to surpass this resistance level, it might pave the way for a price test at 216.9, signaling potential upward momentum.