Commodity Trends: Gold rallies, copper in pressure

The National Multi-Commodity Exchange of India (NMCE) has launched 11 new futures contracts in agricultural commodities and gold for January, February and April 2010 delivery. The futures contract in gold, cardamom, copra and guargum will expire in January 2010 delivery, it said. The three contracts, rape mustard seed, rubber and sack, will close in February next year, while the rest four contracts - castor seed, isabgulseed, pepper and one kilo gold contracts - will expire in March 2010, it added.

The Centre has fixed wheat prices between Rs 1,379.7 and Rs 1,728.23 a quintal for sale from the stocks it is holding in the open market. According to a note sent by the Food Ministry to the Food Corporation of India (FCI), tenders will be floated for sale of wheat between October and December in each State/FCI region and depot-wise bids would be invited. Seven days notice will be given to bidders.

Kerala has become the top producer of cashew nuts in the country thanks to the initiative under the National Horticulture Mission. It presently produces 6,100 tonnes (more than 50 per cent of the national output) with a productivity of 685 kg/ha. And additional area of 1,035 hectares under new planting and rejuvenating cocoa plants in 680 hectares is being undertaken under the National Horticulture Mission scheme.

The BSE, NSE, MCX, forex, bullion and commodities markets are observing a holiday on Monday on account of ‘Bhaubeez’. The Bombay Stock Exchange's main index closed at 17,326.01 points in the Moorat trading session on Saturday. The Nifty closed flat at 5,141.80

Gold
Benchmark December Gold futures at MCX rallied this week to Rs 16048 per 10 gms before settling to a modest figure of Rs 15831 at close of trade on Friday. Higher prevailing prices failed to lift retail market sentiments on ‘Dhanteras’ the biggest gold buying festival in the country. Weaker rupee helped gold climb from a fall towards weekend as weaker rupee makes the dollar-quoted asset expensive.

Rupee witnessed up and down movements on choppy trade on Friday as domestic shares failed to provide a clear direction, while dollar demand from importers and mostly lower Asian units also weighed on sentiment. Profit taking at current levels could bring down MCX gold contract to Rs 15600 levels before stabilizing.

In USA, gold futures ended higher on Friday on strong investment buying and worries about financial sector following quarterly loss posted by Bank of America. At Comex, December gold futures rose 90 cents at$1,051.50 an ounce after recording a high of $1072 on Wednesday. Gold rose to new peaks above $1,070 levels per ounce on Wednesday as the greenback continued to slide against a basket of six currencies, although there were worries that the metal may have become overbought.

Analysts pointed out that gold’s recent rise was fuelled by currency worries rather than inflation. Oil rally towards $78 raises inflation concerns that supports gold, Pull back is likely in gold prices as open interest is staying above 500,000 lots in Comex. Meanwhile, silver is looking for direction from gold with spot silver prices at $17.41.

Gold is likely to show weakness on eroding jewelry demand and might decline to $1025 and toward the psychological $1000 mark.

Base Metals
US copper futures traded lower towards weekend on firmer dollar and fears about increasing supply and fall in near term-demand for base metals. Copper is facing pressure from the extended gains in dollar versus the Euro. COMEX copper warehouse stocks went up 135 short tons on Thursday, bringing total levels to 56,852 short tons.

Stronger rupee weighed on sentiments during mid-week at MCX where its November contract showed weakness. However, eventually weaker rupee did not harm the contract as optimism on the global economy and strong demand from China helped sustain prices at Rs 291 levels.

MCX Copper futures are likely to be range-bound at Rs 287-295 next week and face resistance at Rs 297 levels. The October Zinc contract at MCX ended marginally up at 93.90 while lead for October delivery was also marginally up at Rs 101.65.

Energy
Bullish sentiments prevailed in US crude futures market and on Friday it extended gains for the seventh straight session and closed a the highest level in a year, lifted by a late rally. Other in the oil complex including heating oil futures recorded 11-month highs. On Nymex, November crude settled higher at $78.82. The contract gained 9.42 percent the highest since October 2008. Unexpected steep declines in US gasoline and distillate inventories helped support the oil rally. Rising oil prices also lifted US energy shares even as financial sector was down on Bank of America’s reported quarterly losses. October Futures for crude oil at India’s MCX traded at Rs 3610 on close of session last week.

Soybeans
Soybeans recovered towards weekend tracking gains in global markets but was checked by likely rise in arrivals in the next few weeks. The benchmark December palm oil futures on Bursa Malaysia Derivatives Exchange ended at 2,178 ringgit a tonne, up 3.17 percent.Palm oil and soybean are related commodities and their prices often move in tandem. In US, soybean advanced as dollar fell to 14-month lows and crude oil rose to a high above $78 per barrel.

Increased market arrivals could put pressure on prices in the days ahead. Madhya Pradesh and Maharashtra will witness increased arrivals putting downward pressure on prices. Soybeans October Contract at MCX rose marginally to Rs 2082 while November contract rose to 2092

Pepper
India pepper futures ended slightly higher on Friday buoyed by spot demand but gains were limited by the Brazilian crop, analysts said. Markets remained volatile, absence of selling pressure and the speculative activities helped prices to rise marginally.

Pepper futures market on Wednesday witnessed a sharp fall on bull liquidation due to shortage of time for carrying forward before the maturity of the October contract on the 20th. Add to this there were reports of decline in prices in Vietnam and Indonesia. The domestic demand also failed to pick up as expected.

October contract fell by Rs 315 a quintal on NCDEX to close at Rs 13,690. November and December dropped by Rs 276 and Rs 265 respectively to close at Rs 13,867 and Rs 14,040 a quintal.

Spot markets continue to to be dull and will resume in full swing after Diwali holidays from October 23. The Brazilian crop capped gains as it continues to sell at a discount to Indian prices, they added. Spot pepper rose by over 7 rupees and ended at 13,966.35 rupees per 100 kg in Kochi, a major trading hub in Kerala. October contract at National Commodity and Derivatives Exchange rose from Rs 13743 to Rs 13777, a gain of 0.23% while November contract rose to RS 13978 from 13920 on Thursday. a gain of 0.34%. In the near term, the market looks set for a correction but the medium term prospects are still bullish.

Chana
India’s Chana futures have showed bullishness last week due to the ongoing festivals and firm prices of kharif pulses which supported chana prices. Improved demand in spot markets especially from North India has helped improve market sentiments. October contract at National Commodity and Derivates Exchange rose to Rs 2,294 while the November contract gained 1.19% at Rs 2,390. In the Delhi spot market, the price rose by 36 rupees to 2,325 rupees per 100 kg. Demand for pulses usually goes up during the country's peak festival season from August to October.Upside gains are being held back due to ample stocks and a likely rise in acreage limited the rise.