Commodity Online
Rebounding dollar led to weakness in commodities last week as it curbed demand for raw material and unexpected jump in US oil inventories led to slump in crude oil prices.

The Reuters/Jefferies CRB Index of 19 commodities dropped 2.7 percent to 243.55, led by declines in crude oil, heating oil, natural gas and silver. The decline was the steepest for the index since June 3. The dollar rose to the highest level since July 18 against a basket of six major currencies. Although on Friday crude oil prices recovered on data which showed that US economy contracted less than expected in the second quarter which boosted the risk appetite.

India has given gave permission to private trade to import refined sugar at zero-duty, which was so far restricted to public sector trading firms STC, MMTC and PEC. However, the 10 lakh tonnes quantitative restriction remains on the import. The present provision for duty-free imports ends on August 1.

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Copper and aluminum soared to multi-month highs as trading in July ended with optimism about economic recovery, helping metals markets post one of their best months since March. Steel prices in the U.S. rose 13 percent in July, the first gain in a year, after distributors began restocking their inventories.

India's economy is likely to grow 7.2 percent in the fiscal year 2009/10 (April-March) on the back of strong domestic demand and higher infrastructure spending, according to National Council of Applied Economic Research.NCAER said the government's stimulus packages would help the recovery of industry and expects the factory output in FY10 to be 6.7 percent.India's factory output, which had fallen in December, February and March, grew 2.7 percent on year in May.

Precious Metals
Bullion prices traded lower in the last week amid volatile trading. Prices fell sharply as early gains in dollar weighed on gold prices. Falling oil prices also eroded demand of yellow metal. CFTC regulators have started a series of hearings on limiting speculations in commodities trading which is also weighing on the commodities as a whole. As Spot Gold was unable to trade consistently above the wall of resistance around $956 - $958 levels, profit booking was witnessed along with reluctance of bulls to build fresh long positions around these levels.

The Dollar Index (DX) is currently trading around 79.50 levels, earlier touching its recent low of 78.33 on June 2nd, which is acting as short-term bottom. Trading below this level would lead to a sharp weakness in the USD, in turn supportive for the bullion pack. Physical demand, both ETF as well as jewellery continue to play a significant role in determining prices. US Dollar direction along with cues from Global financial markets shall influence the bullion pack as rising global financial markets could mean investors raising their risk appetite. MCX August Gold can face support around Rs.14540/14415 levels, whereas resistance is seen at Rs. 14890/15105 per 10 gram.

Base Metals
The base metals market witnessed sharp price movement in this week. Markets took cues from the equities and currencies and risk appetite remained the core movement in these two markets. The dollar factor plays a crucial role as a stronger dollar makes base metals look unattractive for holders of other currencies and vice-versa. However, if risk appetite in the financial markets improves then demand for higher and riskier investment assets increases, leading to a surge in equities. And this leads to a slump in the demand for the dollar, thereby pushing base metal prices higher. The last week witnessed both kinds of situation, wherein, prices gained due to a weaker dollar on one hand and slumped due to a stronger dollar.

The Central Bank of China announced that it would maintain a loose monetary policy in order to consolidate its recovery. However, the bank also said that it would fine tune its loose monetary stance and keep prices within a reasonable and controllable range. Since China is the driver of base metals demand, this news also boosted prices yesterday. Base metal prices are gaining sharply and the run up could continue in the coming days on the back of a rise in risk-appetite. However, profit-booking at higher price levels is inevitable.

Crude Oil
Crude Oil prices traded on volatile note in the last week. Oil prices were trading sharply lower in the first half of the week, as fall in equity markets and surge in dollar weighed on oil prices. Downfall accelerated after weekly inventory data showed more than expected rise in oil stocks. As per US Energy department, crude oil stocks increased by 5.1Mbbl to 347.8Mbbl against the expected decline of 1.3Mbbl. Rise in stocks came amid rise in oil imports and fall in refinery utilization rates. Oil prices touched a one week low of $62.70, but prices reversed all its losses as positive economic data and better than expected corporate earnings report boosted hopes about economic recovery.

Inventory data has shown continuous tepid demand for energy products in US, world’s largest oil consuming nation. Latest fall in equity markets have also sapped risk appetite among traders and sparked concerns over the sustainability of markets at current levels. Basic demand fundamentals for oil are bearish. We believe that oil prices are having resistance near $70 mark in the near term and if prices close below $62 levels then can head towards $58 per barrel level. MCX August Crude Oil can get support around Rs3160/3050 levels, whereas resistance is seen at Rs. 3340/3400 per barrel.

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