The commodity markets had a depressed week. The trading pattern was in line with expectations as the weak crude outlook dragged bullion and metal prices lower.
Relief rally can’t be ruled out.
The commodity markets had a depressed week. The trading pattern was in line with expectations as the weak crude outlook dragged bullion and metal prices lower.
Agri commodities kept up a brave front but, barring a strong performance from select counters such as mentha oil, the overall mood was that of caution. Oil is sliding towards the February 2006 levels, Gold is trading near its 23 June bottom and silver near it’s 19 July lows. While a relief rally should not be ruled out for now, the ascent may take time to gather momentum.
The “shradha paksha” - Hindu calendar period of remembering the departed and therefore a mourning period — is considered inauspicious for bullion purchases. That has exerted additional downward pressure on the prices.
Agri commodities:
Chana has seen a retracement from the previous week’s tops and, unless the same level is scaled again on the upside, fresh buying is ruled out for now.
Kapas Khalli has finally eased after a spectacular run and the trend line support is now violated. Unless the Rs 410 resistance is overcome with high volumes, the outlook is likely to be that of short term weakness.
Mentha oil is warming up for the primary demand season ahead as the breakout above the Rs 600 mark has seen a flare up in the past week. As long as this momentum continues, I expect the rising tops and bottoms formations to continue. Barring profit sales which may see the Rs 635-645 levels being tested, the outlook remains positive.
Metals:
Copper has seen high volatility and a breakdown below the Rs 360 mark with higher volumes may lead to a slide to the Rs 348 mark in the next few sessions. Upsides are likely to be limited to the Rs 354- 357 mark in the coming few sessions.
Silver has seen selling especially after the Rs 18,350 support was violated on decent volumes. The psychological level of Rs 17,000 was also violated and, should this trend continue, the Rs 16,200 - 16,350 levels may be a possibility this week. The short term outlook will improve only if silver surges and stays above the Rs 18,200 levels.
Gold has slipped sharply with lower relative strength as compared to silver. A sharp drop in crude prices did impact gold and the yellow metal trades precariously near its 15-week lows. A crack below the Rs 8,400 mark is likely to cause further panic within the bull camp in the absolute near term as technical stops will be hit. Barring a pullback rally on short covering or rising crude prices which may witness defensive buying, the absolute short-term outlook is that of weakness. The possibility of a pullback is above average as the US dollar has lost against most currencies save for the British pound, the Hong Kong dollar, Singapore dollar, yen and the Swiss Fr. The parity with the yen will be a major determining factor in the coming week where bullion price discovery is concerned.
Energy:
Crude oil has behaved on expected lines. In spite of the geo political tensions on the horizon, the black gold has ruled weak. Currently near its April 2006 lows, there has been some pullback due to profit taking by the bears. The absence of hurricanes and supply disruptions has seen the prices remaining subdued.
While a relief rally may be expected, the short-term outlook remains under pressure. Natural gas is trading near its all time lows and that is a sign of heaviness on the upsides. I feel the commodity will take some time to consolidate before a fresh upmove can be seen in the near term. The Rs 285 level will continue to be a formidable hurdle in the near term. Only a sustained trade above this mark will witness the possible return of the bulls on this counter.
vijay@BSPLindia.com
Mandatory disclosure: The analyst has exposure to gold & copper futures mentioned above at the time of writing this piece.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}