Commodity Online
With hopes of economic recovery receding after a serious of negative US data released last week while Chinese demand factor not so rosy, the commodity Futures was in the grip of hefty-sell off that resulted in prices of most commodities including those in energy, base metals, precious metals and agriculture falling rapidly although hopes of economic rebound by end of 2009 is still being predicted. On the positive side the re-affirmation of the G-8 commitment to open up markets and free trade to stimulate economic activity has once again been welcomed by the investing community worldwide. So was the G-8 commitment to fund for food security in poorer nations

The neutral impact budget presented by Pranab Mukherjee on July 6 did not make much waves in the commodity sector although abolition of commodity transaction tax was widely welcomed by the industry. On the positive side, the social and rural focus in the budget was hailed by many although the market reacted negatively to rising fiscal deficit in the Budget.

Meanwhile, wheat futures at NCDEX have got a fresh lease of life as investors rushed to the commodities in anticipation of export demand from production deficit countries. Wheat had lost 3.18 percent in June while the near month contract was trading at Rs 1,110 per qtl towards weekend, a significant rise from Rs 1,078.40 per qtl prevailing in July 1.

Precious Metals
The Bullion pack is presently under pressure as both the physical as well as investment demand continues to wane compared to the previous quarter. The holdings of SPDR (World's largest gold ETF) stood at 1,109.81 tonnes as of July 8, down 10.38 tones from the previous business day and down 24.22 tonnes from a record hit on June 01, 2009. Factors supporting the bullion pack are the inflationary fears as investors still believe that the relentless printing presses of the governments are going to eventually lead to an out of control inflationary spiral sometime in the near future, which would lead to an increasing appetite to accumulate gold & silver in physical form.

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The direction of the USD shall continue to be the primary driver for the bullion pack in the coming weeks as any further negative economic data could drive investors towards the safe refuge of the USD, still the only global reserve currency. Spot Gold can find crucial support in the zone of $899-887 levels, whereas major resistance zone is seen between $927 and $943. MCX August Gold can face support around Rs.14350/14270 levels, whereas resistance is seen at Rs. 14575/14710 per 10 gram.

Base Metals
Base metal prices are expected to face pressure on the downside as the imminent summer slowdown coupled with global economic concerns could put pressure on prices. The dollar is expected to remain in the limelight as China recently reiterated the need for a global currency to rival the dollar. Also, the G-8 meeting will discuss the dollar’s role in this week’s meeting. China’s Strategic Reserve Bureau has officially stopped stockpiling and indications are that it has begun selling. This could add pressure on the downside as base metals are as it is volatile due to the slowdown in the summer period. Hence, we expect base metals to remain choppy in the short-term but the long-term prospects look positive. Demand could improve in 2010 as the global economy is expected to improve by then.

The IMF in its latest view indicated that the global economy is slowly starting to pull out of its deepest recession since World War Two but a recovery will be sluggish and policies need to remain supportive. The risks to the global financial system have moderated since April, but it is too soon for governments to withdraw stimulus and support. Worldwide economic growth is expected to recover to 2.5% in 2010. But the IMF still expects the global economy to contract 1.4% this year. Base metal prices could come under pressure today as we approach the weekend. Funds could liquidate their long positions ahead of the weekend as the financial market situation is highly volatile. As it is, the summer slowdown puts pressure on base metal prices.

Crude Oil
Crude Oil prices fell two month low in the last week after global risk sentiment faltered and weekly inventory data once again raised concern over energy demand in US. Crude oil inventory data showed that decline in oil stocks is mainly on account of falling imports and relatively higher refinery utilization rates. Gasoline inventory rose by 1.9Mbbl to 213.1Mbbl against the expected rise of 0.6Mbbl. Distillates stocks were up by 3.7Mbbl to 158.7Mbbl, the highest since December 1984. Crude Oil is expected to remain under pressure and any rise in oil prices can be taken as a selling opportunity. Although yesterday’s US initial claims data was positive, unemployment rate are still significantly higher, limiting consumers capacity to spend on energy products.

Also inventory data continues to show bleak energy demand in US, world’s largest energy consumer. There is growing concern in the market that economic recovery is fragile and we can experience sluggish economic activities in coming months. G-8 meeting has indicated that recovery from earlier economic slump is not encouraging and governments will have to make sustained efforts to bring their economy on growth path. We expect NYMEX crude to meet with resistance around $63 levels. On the downside, we expect the prices to be strongly supported around the $54 levels. MCX July Crude Oil futures have support at Rs. 2830/2750 and resistance is seen at Rs. 3083/3090 per barrel.

Soybean
Soybean (NCDEX Aug contract) prices fell sharply around 10% during the last week as compared to previous week on account of huge losses of soybean futures at CBOT and lower export demand of soy meal from global livestock industry. Aug Soybean futures traded in a range of 2225-2495 per quintals during the past week. Sowing progress till July 03, 2009, area covered under kharif oilseeds was 35.58 lakh hectares, down by 48% as compared to 68.76 lakh hectares in corresponding period a year ago, due to delayed monsoon this year. Domestic area under soybean is reported lower at 14.16 lakh hectare compared to 43.50 lakh hectare in the corresponding period a year ago. USDA’s Weekly Export Sales figures released on Thursday, net export sales for soybean 1228600 tonnes. As of July 2, cumulative soybean sales stand at 100.9% of the USDA’s forecast for 2008-09 versus 5 years average of 99%. Net export sales of meal were 30900 tonnes. Sales need to average 103000 tonnes each week to reach the USDA’s forecast. In the coming week (NCDEX Aug Soybean), prices are expected to move down with a support at 2140/2050 and resistance is seen at 2400/2465 levels.

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