In this week’s dissector, we take a close look at zinc. We considered the spot price of zinc traded on London Metal Exchange (LME). The spot price is quoted in dollar/MT (metric tonne). LME Zinc spot added $11 through the week to close at $2064.2 a mt on Friday.
Long-term view
Zinc spot bottomed out, and took support at $1,040 in December 2008. However, following a medium-term uptrend, zinc encountered resistance in the band between $2,575 and $2,635 in mid-2009. This level proved to be a strong resistance as it halted the metal from breaking through this band during October 2010 and in February 2011. Subsequently, zinc started to decline and was on a downtrend until August 2012.
Significant long-term support in the range between $1,750 and $1,800 arrested the metal’s fall last month. Triggered by positive divergence in daily indicators, zinc changed its direction upwards.
Long-term picture of zinc is sideways consolidation phase in a broad band between $1,750 and $2,635. Only a conclusive decline below the lower boundary at $1,750 will pull zinc down to $1,600 and then to $1,500 in the long-term. Next support for zinc is positioned around $1,300.
On the other hand, decisive jump above the key resistance band between $2,575 and $2,635 will take the metal higher to $2,800 and then to $3,000 in the long-term horizon.
Medium-term view
Since taking support at around $1,750 in mid-August 2012, zinc has been trending northwards. On September 10, the metal jumped by 2.2 per cent decisively breaking through its 200-day moving average. It is hovering well above its 50- and 200-day moving averages. But after hitting resistance at $2,100, zinc is moving sideways.
Strong breakthrough of $2,100, following its sideways movement, will take the metal higher to $2,200 which is another significant resistance. Only a decisive jump above the resistance can push the metal higher to $2,400 in the forthcoming months.
Current uptrend stays in place as long as zinc trades above $1,900 levels. A fall below this level will mitigate the uptrend and pull the metal down to $1,800 or $1,750. Immediate near-term supports are positioned at $2,000 and $1,940.