Commodity Online
India’s inflation inched higher near to 12 percent and major crops except paddy has seen a drop in acreage in the on-going kharif season, as government released the official estimates in the weekend. A strong dollar, rebouncing of crude oil prices to $127 levels weighed on the performance of metals-base and precious. Poor US macroeconomic economic data also led to increased speculation in commodities.

In India, paddy sowing in the on-going Kharif season rose by 24 per cent to 231.3 lakh hectares so far against 207.6 lakh hectares in the same period last year. However, areas under pulses continued to witness a downward trend with a 24 per cent fall to 71 lakh hectares(LH) till August 1, against 92.9 LH in the same period last year. Similarly is the case with oil seeds, sugar cane, cotton and many other crops which are at the mercy of the monsoon.

Gold
Gold prices were range bound during the last week, as falling oil prices weighed on gold prices. Gold prices fell below $900/oz for the first time after a month. In the initial party of the week, firm financial markets and strength in the dollar lead to heavy sell off in precious metals. But prices managed to recover sharply amidst poor macroeconomic data from U.S. spot Gold increased by more than $9/oz on Thursday after unexpected rise in weekly jobless claims and less encouraging GDP numbers from US. The U.S. Commerce Department reported on Thursday that GDP increased at an annual rate of 1.9 percent in the second quarter, comparing with the expectation of 1.8 percent rise. Underlying sentiments in gold are driven by dollar and crude oil. Any weakness in oil can weigh on gold prices in the short term, but overall long term fundamentals are still supportive for gold. On the International front, Spot Gold is meeting with stiff resistance at $936oz levels, where as support is seen at $895/oz and then at $873/oz levels. MCX October Gold support stands at Rs. 12,400/12,220 & resistance at Rs.12690/12970 per 10 gram.

Crude Oil
Oil prices managed to consolidate in the last week, after witnessing more than $22 fall in prices. NYMEX Oil futures touched low of $120.42 per barrel, before bouncing back to $127.89 per barrel on Thursday. Strong gasoline futures fueled crude oil's $4.58 rally on Wednesday, after the U.S. Energy Information Administration reported an unexpected drop of 3.5 million barrels in gasoline inventories last week. Oil's 11.4 percent loss for the month of July marked the biggest monthly loss in percentage terms since December 2004. Declining levels of demand are still in the forefront of the market. Weak macroeconomic numbers are certainly adding to worries that high energy prices and a softening economy are eroding fuel demand. Obviously this can weigh on oil prices in the medium term and prices can remain highly volatile. In terms of geopolitics, traders are also keeping a cautious eye on tensions over Iran's nuclear program. Adding to this the potential for hurricanes to disrupt output in the Gulf of Mexico can put a floor under prices. NYMEX Oil futures are expected to have support at $120/114 per barrel and can face resistance at $127/133.50 per barrel. MCX August futures can have support at Rs. 5100/4845 per barrel and Rs. 5395/5675 per barrel.

Base Metal
The base metals pack traded on a mixed note as a variety of factors influenced the markets. A major factor that moved base metal prices was the US Dollar movement as there was a list of economic data releases in the last week. Currency movement is playing a crucial role in determining base metal prices. Metals have seen a sudden rise in prices as the US Dollar has become weak as a weaker US Dollar makes base metals attractive for holders of other currencies. Copper prices have managed to hold strength around $8,000 levels.

This is on the back of news that Group Mexico has not decided date to re-start its mining operations. Copper prices received a boost on the back of this. However, for the short-term we feel that copper prices could decline and trade between $7,750-$7,900, as the red metal is facing pressure around $8,000 levels and is unable to sustain at those levels. Zinc, the metal with weak fundamentals rose on supply-related news from China. If this continues then zinc prices could trade higher as they will have a fundamental reason to depend on. However, this has to be studied over a period of time and we could then arrive at a fundamental view for zinc. As of now, we foresee that the rise in zinc prices could be short-term. Overall, the base metals movement for the coming week is expected to remain volatile and the US Dollar will play a major role in price movements.

Guar Seed
Rains across major Guar Seed growing areas of Rajasthan led Guar Seed futures to fell drastically during the last week. NCDEX September Guar traded in the range of Rs. 2053-1852 per qtl. Rains covered most of the Guar growing regions which boosted the sowing in Badmer, Jodhpur, Jaisalmer and other regions thereby depressing the prices. Forecast of rains in the next few days may further increase the sowing in these areas. However, overall production would depend on the next 2 spells of rains which are necessary for the growth and yield. We expect further correction for next 2-3 days. However, the trend for the short to medium term still remains bullish on expectations of better export opportunity due to weakening INR.