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2008-10-11 22:00:00 |
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Commodity Trends: Hurt by economic slowdown
Commodity Online
Commodity prices have crashed worldwide as global economic slowdown hits markets worldwide. Except for gold whose prices are rising on the of back of increased buying on safe-haven buying, most commodities are on a declining mode. India’s inflation fell marginally to 11.80 per cent for the week ended September 27 on account of declining prices of food items, including cereals and pulses.
The annual rate of inflation, measured by the wholesale price index, declined to 11.80 per cent from 11.99 per cent a week ago. The prices of fruits and vegetables during the reporting week declined by one per cent, cereals and pulses by 0.1 per cent and groundnut by two per cent.
Gold
Gold prices rose in the last week, after global financial markets collapsed amid growing widening credit crisis. In currency market, Euro fell almost 2.1% against the dollar after equities in UK fell the most since 1987. With one bank after another going down in Europe, its financial panic which is feeding itself, sending jitters across the globe. Euro is presently trading below its (200-Week Moving Average) clearly indicative of the current financial situation.
Excessive volatility seems to have become the order of the day, indicative of the fact that the global financial markets are clearly still unnerved and in extreme pain, given the turmoil which shows no signs of ending. Gold prices are also supported by strong physical demand from investors.
Demand for gold coins and a bar has increased substantially in last month. In India, high prices have kept buyers at bay, but we expect that demand will pick up by Diwali. Weak macroeconomic data from US and Europe indicates that world economy is sliding into recession and traders will opt for safer assets like gold. We expect gold prices to remain bullish in coming months, and expect international gold price to touch $975 in the short term.
Crude Oil
Crude Oil prices witnessed a steep fall in the last week, as concerns over weakening oil demand weighed on oil prices and stronger dollar against major currencies weighed on oil prices. Wednesday’s inventory data showed more than expected rise in crude oil stocks and surprise build up in gasoline stocks, which put pressure on oil prices. Bears have taken strong control over crude oil prices. Oil prices are hitting new lows for the year and are poised to move southward till the time financial turmoil persists. Factors like sharp rise in oil stocks, rising dollar and no active hurricane in the Gulf of Mexico, are putting pressure on oil prices.
We expect oil prices remain bearish in the near term with a resistance at $86 per barrel. With the financial crisis engulfing European economies, one has to wonder whether demand from Asian countries can be maintained, which is the last hope for the bulls. All this could lead to fall in energy demand in the medium term. Under such situation we expect that trend in oil prices can remain bearish in the medium term with a price target of $75 per barrel.
Rubber
Rubber prices have continued the declining mode that was visible last week. Infact, in one fortnight rubber prices crashed from Rs 137 to Rs 85 a kg. This has adversely affected the rubber dealers who have called for a ban on further duty-free imports of rubber, at least for six months. Analysts are of the view that rubber prices may not have any direct correlation with global economic meltdown. Indian automobile industry, the largest consumers of natural rubber is not facing any crisis. It is usual for rubber prices to decline during October. Rubber witnessed sharp fall in prices on Friday. The sentiments were extremely bearish and sheet rubber declined to Rs 84 per kg as against the previous level of Rs 90 per kg. Falling crude prices have contributed to sharp decline in rubber prices. The average price of natural rubber during 2007-08 was Rs 90.70 as against Rs.92.30 during 2006 -2007. But during the current year it is between Rs 95 and Rs 100. Rubber prices may decline further before stabilizing.
Continued... |
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| Technical Calls |
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Commodities recap evening of 3rd Dec, 2008 |
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Crude plunged below $47 on back of expectation of rising weekly inventories due later today. OPEC members remained concerned about oversupply in the world oil market and may decide to cut output further at their next meeting in Algeria on Dec. 17. |
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Flashback - Energy 3rd Dec, 2008 |
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Today, oil prices will take cues from weekly energy inventory data, which will be released at 9.05p.m. As per expectation, data can weigh on oil prices. |
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Flashback - Base Metals 3rd Dec, 2008 |
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Base metals are taking cues from the equity and currency markets. Also, economic data and releases are indicating a weak economic situation and prices are under pressure. |
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