Commodity Online
Will the India futures market in commodities become a round-the-clock operation? ICEX, the newly approved comex has claimed in its brochure that it will enable “trading beyond midnight” which has been objected to by markets regulator, Forward Markets Commission. Meanwhile, the largest bourse, MCX has asked FMC to consider extending trading beyond midnight in some global commodities such as bullion and energy. At present, comexes open at 10 am and close by 11.30 pm.
The combined turnover of 22 commodity exchanges surged by 31 per cent to Rs 36,59,787 crore till October this fiscal compared with Rs 27,94,879 crore in the corresponding period last year.
The Dow industrials suffered its worst slide since July on Friday on concerns that the economic recovery won't be robust enough to sustain the seven-month stock rally, while financials sank on renewed worries about Citigroup's balance sheet. Investors unloaded shares across the board on the day that marked the end of the fiscal year for many mutual funds, putting the S&P 500 on the brink of a correction. Wall Street's favorite measure of investor fear, the CBOE Volatility Index, soared 24 percent -- its biggest one-day percentage gain since October 2008 -- and the Dow had its worst day since July.
India’s inflation rose fastest in six months to stand at 1.51 per cent for the week ended October 17, primarily due to rising oil prices on a year-on-year basis.The headline inflation rate, as measured by the Wholesale Price Index (WPI), stood at 1.21 per cent for the previous week ended October 10, and was 10.82 per cent during the corresponding period in 2008.
Bullion
Spot Gold prices have gained around 3.7% in the month of October and the yellow metal touched a high of $1,070/oz in the same period. Weakness in the dollar contributed to the rise in gold prices as fundamentals were still subdued. Prices have raced too far too fast as the weakening condition of the dollar made the yellow metal look attractive for holders of other currencies. Also, uncertainty over the pace and strength of the economic recovery has led inventors to purchase the metal as a traditional safe-haven asset.
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The US Federal Reserve is not expected to raise interest rates at next month’s meeting. Hence, in the short-term the dollar could continue to witness downside. This factor could provide support to gold prices. At the same time, gold prices may not witness new highs as markets could now become wary of Fed’s interest rate decision. Interest rates may not rise in the immediate meeting but we could see that happening by the year end. Until then the weaker dollar will remain a catalyst to the rise in gold prices. In the coming week, Spot Gold prices have support at S1 $1,019 S2 $997 and face resistance R1 $1,062 R2 $1,078. Gold prices on the MCX will find support at S1 Rs15,810 S2 Rs15,540 and face resistance at R1 Rs16,050 R2 Rs16,250.
Base Metals
Copper prices have gained 7.2% in the month of October and this sharp rise in prices was backed by weakness in the dollar, industrial threats and strikes at mines coupled. Copper prices could rise in the near-term as the following factors could fuel the upside – 1) strong Chinese economic data should support base metal prices as demand prospects improve, 2) the outlook for base metals is starting to improve significantly as market balances finally start to tighten and 3) supply disruption at Chilean copper mines will continue to provide support.
China’s economy expanded at the fastest pace in a year as stimulus spending and record lending growth helped the nation lead the world out of recession. Chinese economy surged 8.9% in the third quarter and retail sales and other indicators were robust in September. China’s economic growth has shown steady recovery in the past three quarters, as the GDP grew by 6.1 percent in the first quarter and 7.9 percent for the second quarter.
US GDP grew in the third quarter for the first time in more than a year, expanding at a 3.5% rate from July to September. The data was positive and showed that the economy returned to growth, thereby reducing the US currency’s safe-haven allure and sending investors to higher-yielding assets for better returns. Demand prospects for base metals will improve as the world’s largest economy comes out of the recession. In the coming week, we could witness bulls take charge of the base metals complex. Positive economic growth could lead to improvement in demand from the Western world in the coming year.
Fundamental prospects in the case of base metals could turn brighter as US reports positive economic growth. This news is expected to provide upside to base metals in the near-term. The dollar could weaken as risk appetite in the financial markets could rise and lead to increase in demand for higher-yielding and riskier investment assets. In the coming week, copper prices on the MCX will have support at S1 Rs303 S2 Rs291 and face resistance at R1 Rs319 R2 Rs332.
Crude Oil
Oil prices gained a whopping 12.6% in the month of October despite poor demand situations. A weaker dollar made the dollar-denominated commodity look attractive for holders of other currencies. Fundamentally the price rally in crude oil may not be justified because during this season US refiners shut down their refineries for maintenance. Hence, it is bearish for oil prices. Oil prices have managed to cross the psychological mark of $80/bbl as a weak dollar is supporting prices on the upside. If the dollar continues to remain weak then oil prices could continue to receive upside support. But the upside could be capped in the coming week if oil inventories continue to rise. In the coming week, crude oil prices will have support at S1 $76.40 S2 $73 and face resistance at R1 $82.40 R2 $82.50. On the MCX oil prices will have support at S1 Rs3670 S2 Rs3550 and face resistance at R1 Rs3810 R1 Rs3920.
