Commodity Online
Dollar strength and Euro Zone deficit concerns in Greece, Spain and Portugal lead to commodity prices falling across the board last week. Apart from gold, base metals and energy, most agri-softs also tumbled.

US Cotton futures dropped to the lowest prices since November as a rally in the dollar eroded the appeal of commodities and slumping equity markets revived concern that the economic recovery may stall, slowing demand for clothing. The dollar jumped to the highest level against major currencies since July 2009. Wheat prices fell in Chicago, capping the fourth straight weekly decline, as buyers opted for supplies that are cheaper than grain from the U.S., the world’s largest exporter. Cocoa prices declined to a three- month low while Coffee fell for the third straight day on Friday

The value of trade in agri-commodities on the futures exchanges has doubled during April-January 15 period of the current fiscal, while the cumulative value of futures trade increased 50 per cent. According to the Forward Markets Commission data, the cumulative value of trade in agricultural commodities increased to Rs 9.61 lakh crore from Rs 4.68 lakh crore during the same period a year ago. The overall value of trade on the futures exchanges increased to Rs 58.91 lakh crore from Rs 39.19 lakh crore, The value of trade in other commodities increased 98.15 per cent.

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National Multi Commodity Exchange (NMCE) has registered 100 percent growth in second physical delivery in Gold Guinea contract. Compared to the 97 GG8 (Gold Guinea 8 gm) coins delivered during the completion of the first contract that ended on 31st December 2009, the number of coins delivered in the second contract (ended on 31st January 2010) is 195. the GG8 contract was specifically designed for the retail participants was launched in Kochi last November.

India’s food inflation, based on the annual wholesale price index, surged 17.56 per cent during the week ended January 23, higher than the previous week's annual rise of 17.40 per cent. This is the second week in a row that food inflation has increased, after easing for three successive weeks. Food inflation, which had begun easing after touching its highest levels in nearly a decade at around 20 per cent in December, rose mainly because potatoes were up 44.91 per cent and pulses 44.43 per cent year-on-year in the latest week

Gold
Gold prices fell sharply in the last week and breached 12 weeks low and touched $1049.20 levels as the dollar’s strength continued to weigh on the bullion pack. Gold prices fell significantly towards the end of the week due to unfavorable economic data releases from the US and Euro zone comprising of increase in Unemployment Claims and Preliminary Non-Farm Productivity in the US which led to people flocking towards the low yielding dollar. The European nations comprising of Greece, Spain and Portugal are facing trouble reducing their debts which in turn made the dollar attractive. Greece is facing fiscal deficit of 13% of its GDP leading to growing concerns of economic recovery. In the earlier trading session of the week witnessed positive for gold on account of favorable economic data comprising of the ISM Manufacturing PMI and the existing home sales which increased risk appetite amongst the investor group. However, the Unemployment Claims and the Non- Manufacturing PMI which showed results less than forecasts made risk aversion emerge in the markets. The dollar could gain further amidst the growing concern of economic recovery and exert pressure on prices of gold.

On the currency front, the Dollar Index hit a recent high of 80.44 as investors continue to flock to the low-yielding dollar as risk aversion set the tone in the financial markets. Currencies are clearly guiding the immediate direction of the precious metals. In the coming week, prices are expected move slightly down as USD gaining strength as the market is risk averse due to growing instability in the financial markets. Spot gold have a strong support at 1020/998 levels and Resistance at 1100/1135 levels. MCX April Gold shall find a strong support at 15700/15380 levels and resistance at 16550/17000 levels for the coming week.

Crude Oil
NYMEX Crude Oil prices rose to $77.23 on Tuesday, a gain of 3.76% over the previous day on encouraging economic data, weak dollar and technical strength that forced traders to cover short positions. -The daily volume of front-month crude oil futures traded on the NYMEX hit a record on Friday. The surge came as prices fell after the dollar rose sharply and amid worries about the jobs market after a mixed government employment report. Daily trading volume for all NYMEX crude oil futures contracts hit a preliminary 1,007,414 positions, just below the 1,037,324 reached on Dec. 9. The record was 1,092,509 positions set on June 6, 2008.

But at the end of the week, Crude oil turned weak on dollar surge and on speculation that European efforts to reduce deficits will curb growth. Nymex Crude for March delivery fell to $71.19. The Euro slipped to an eight month low against the dollar and rising budget deficits in Greece, Portugal and Spain was expected to hamper economic recovery. US crude oil inventories have risen by 4,72 mn barrels last week on falling demand, according to American Petroleum Institute. Crude oil prices have fallen by 2.3% last week but up 73% on the year. Last week, the market broke below support at the $72.40 and $70.50 levels. An intra-day low of $69.50 was witnessed on Friday. Crude oil looks set to fall further on rising inventory and dollar strength..
Meanwhile, OPEC President Germanico Pinto and China National Petroleum Corporation have expressed optimism that crude oil will trade in $70-$80 range this year on slight increase in global consumption and therefore, OPEC is likely to leave output quotas unchanged when it meets next month.

Base Metals
Eurozone fiscal problems pulled down copper at New York and London last week with Nymex March delivery copper falling by 7%. On Friday, Nymex copper fell 2.15 cents per pound to $2.8575. LME inventories have risen by 1725 tonnes to 541150 tonnes as on Februrary 5. LME 3-month delivery copper fell $125 to $6265 per tonne from a high of $6745 recorded last week. On Monday, Nymex March coopper was up 3.10 per cent higher at $3.0835 per pound.

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