Commodity Online
Commodity investments gave a far better returns to investors than equities in 2008 and this trend is expected to continue into 2009 also as both emerging economies such as India and China and OECD countries try to boost economic growth through stimulus packages. Meanwhile, India’s inflation which has fallen steeply to 6.84% has brought relief to policy makers who are now grappling with the issue of maintaining growth at 7 % levels. The sharp inflation drop was triggered largely by the fall in petrol and diesel prices, analysts said. The inflation rate was 3.84 percent during the corresponding week last year.
According to Barclay’s Capital survey, investors would be better of if they devote more of their commodity portfolio to energy investments in 2009. Agriculture and Industrial metals are the next best bets.
Gold may continue to be bullish although gloomy days are ahead for rubber, base metals and spices which are very much linked to recovery in major consuming markets.
Precious Metal
Gold prices continued its rally in the last week, as sharp fall in dollar against major currencies supported yellow metal. Prices touched a high of $882.40 per ounce on Wednesday before falling on account of profit booking by traders at higher levels. Weak macro economic data from US has boosted gold’s appeal as a safe asset in the times of uncertainty. Gold has been moving completely in tandem with currency markets at present, tracking its movements very closely.
Gold continues to display positive sentiments with prices closing above its 10-Day EMA, indicating that the short-term trend remains up. Spot Gold is meeting with resistance around $880 - $885 levels whereas support is seen at $818/$795 levels. The Dollar Index has crucial support at 77.65 whereas resistance is seen at 81.50. Falling crude prices could pressurize the bullion pack. Silver prices are also moving in tandem with gold prices, but it being an industrial metal, falling base metal prices is putting pressure. A pick-up in physical demand and additional safe-haven buying will support prices, but the need to liquidate positions to meet margin calls elsewhere will cap gold’s upside potential.
Rubber
Rubber prices steadily rose up this week with recovery mode visible in both Futures and physical market. Towards weekend prices rose to 65 per kg for RSS4 as major manufacturers entered the market. Gains in Tokyo Commodity Exchange benchmark futures aided the bullish sentiment to an extent. The marginal increase in tyre sector demand also helped to a great extent.
On the downside the falling Crude Oil prices could dampen the market sentiment as natural Rubber prices usually move in tandem with it. This in turn will make synthetic rubber more affordable to its major consumers-the tyre industry. India’s production is expected to be 8.75 lakh tonnes this year and with no increase in demand expect market could move in a narrow range. Meanwhile, Sajan Peter, Chairman Rubber Board stated that rubber sector would continue to be in crisis for the whole of 2009 while 2010 will be a year of hope for growers and traders. Quoting International Rubber Study Group (IRSG), he said that rubber consumption would fall 3.3% in 2009 and rise by 7.7% in 2010.
