Commodity Online
The impact of the global financial crisis is now felt across the commodities sector be it crude palm oil, Rubber or base metals even as Gold continues to provide reasonable returns to investors as it is considered safe haven. Meanwhile, inflation no longer seems to be an issue for India as it has come down to 8.90 percent for the week ended November 8 due to the fall in prices of petroleum and manufactured products.

Government can take relief in inflation falling to single digit level but it is doubtful how the economy can maintain above 7% GDP growth rate amidst a global economic slowdown. Prime Minister Manmohan Singh has assured the nation that 8% GDP growth is still possible despite the recessionary trends. Government has assured that public investment in infrastructure would be stepped up to give a boost to the economy.

Crude Oil
Crude Oil prices continued its slide in the last week amidst rising inventory, firm dollar and weak global equity markets. Crude Oil prices are trading below $50 a barrel mark, as prices following movements in equity markets. Weak US macroeconomic data and recessionary situations prevailing in world’s leading economies will be weighing on oil prices.

Oil has tumbled nearly $100 from record highs above $147 a barrel in July, as the economic crisis strangles demand growth in large consuming nations such as the United States. With no end in sight for the global economic turmoil, traders continue to focus on the lack of demand. It has been observed that prices tend to become very volatile towards expiration of near month futures contract on NYMEX. Concern over the weakened international economic outlook still weighs on financial markets. Major trend in oil prices is still bearish.

Gold
Gold prices traded range bound in the last week, after prices traded above key support level of $720/oz. Weak macroeconomic data from US, and recessionary situations in major economies helped Gold to maintain its flight to safety status. Gold prices are befitted from slump in equity markets, as safe heaven buying from investors continues to support yellow metal prices. Despite strength in US dollar, gold is trading on positive note. If this robustness continues and physical demand from Gold ETFs stays strong, then we are likely to see further upside in gold prices.

With central banks adding more liquidity to unfreeze credit markets could spur inflation and boost the appeal of the precious metal. On the other hand, lower crude prices can exert pressure on gold prices. Gold prices have crucial resistance at $780/oz, only closing above that will Lead to further upside in prices.

Base Metals
The global financial market scenario is bleak and this factor has led prices of commodities and equities lower. Since corporate activity is slowing down, there are major concerns over demand from companies for raw materials. Because of this we are seeing that the base metals market is following the trend of global equity markets and taking cues from them. In the last two months the base metals pack has witnessed sharp declines. But in the coming two quarters we could witness a revival in prices on the back of support from the Chinese stimulus package.

If this package is actually implemented then physical buying could pick-up and provide some respite to base metal prices. China has targeted to use a package of $586bn for infrastructure development and re-construction of earthquake struck areas of Sichuan.

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