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.

Commodity Trends: India's Futures go rural

India’s inflation fell to near zero levels although it may take some time for it to get reflected in the prices of essential commodities. Even as the BSE Sensex is moving in a narrow range unable to break the 9000 mark, India’s largest commodity bourse created a record by as its turnover touched Rs 32016 crore on a single day the previous highest being Rs 29,887 crore in September 18, 2008. Angel Commodities, one of the leading commodity brokerages also announced the crossing of a major milestone of Rs 1000 crore turnover. What ever gains in BSE in recent days has been attributed to growth in commodity stocks.

Commodity market regulator, Forward Markets Commission (FMC) will install at least 180 display boards at locations such as rural post offices, Krishi Vigyan Kendras and APMCs across the country in the next 10 days to provide prices of farm com modity futures to farmers. Meanwhile gold and crude oil continue to generate more volumes in India’s commodity bourses.

Precious Metals
Gold prices recovered strongly from its lows during last week and almost touched a high of $970/oz., as the Federal Reserve's plans to purchase as much as $1.15 trillion in U.S. bonds and mortgage-backed securities sparked worries of inflation ahead, raising gold's appeal as a hedge against rising prices. This is the most aggressive plan taken by Fed since the early 1960. Demand from gold ETF also increased during this week. Holdings in SPDR Gold Trust, world’s largest gold ETF, touched an all time high of 1103.29 tons.

The volatility in prices in the Bullion pack has increased greatly over the past few months with 19 March being a highly volatile trading day. Spot Gold is finding excellent support in the zone of $880-$890 levels which is viewed as value buying zone by investors. Whereas major resistance zone is seen between $960-$970. The demand for the safe-haven asset is still prevalent with the USD weakening consistently over the past few trading sessions. Also, the increased volatility in the Rupee is playing its role in determining domestic bullion prices. In coming weeks & months, the state of the overall global economic scenario will play a key role in determining bullion prices as investors evaluate various asset classes to channel their funds. Still gold remains the best bet under current market scenario. MCX April Gold can face resistance around Rs.15600 levels, whereas support is seen at Rs. 14850 per 10 gram.

Crude Oil
crude Oil prices traded higher amidst high amount of volatility in the last week. Oil prices surged to a three month high on account of weak dollar and rally in global equity markets. Despite bearish inventory data, prices rebounded from its lows, after US Federal Reserve decided to buy Treasury bonds worth $300bn to ease credit market. Steps taken by Fed rekindled hopes for economic recovery and rise in energy demand. Crude Oil prices have increased by more than 20% this year, on account of strict implementation of production cuts by OPEC to reduce excess supply and weak dollar against major currencies. Volatility in oil prices has increased sharply in past few trading sessions. We expect that oil prices can witness fierce tussle between bulls and bears in coming weeks. Factors like falling demand and weak economic data are favoring bears, but weak dollar, rise in risk appetite amidst strong equity markets are giving bulls a reason to come back in to market. After last week’s rally, oil prices can witness profit booking. During this week, NYMEX May Crude Oil prices are expected to trade in the range of $42.50 and $53.50. MCX April Crude Oil futures have support at Rs. 2390/2175 and resistance is seen at Rs. 2740/2870 per barrel.

Rubber
Rubber prices in domestic and global markets were on a recovery mode this week. In the weekend covering groups lifted the prices to further highs driven by possibly a speculative interest. However, 2009 as predicted by many analysts is not going to be a good year for rubber with consumption to fall 5.5 percent across the globe mainly due to falling automobile sales. Rubber prices have slumped 50 percent in a year as the global recession slashed tire demand. Europe’s car market shrank 7.8 percent in 2008, while U.S. sales contracted 18 percent to a 16-year low

In TOCOM and Shanghai, benchmark natural rubber futures climbed to the highest in more than two weeks as producers restated proposed output cuts and on speculation China, the world’s largest consumer, is adding the commodity to state stockpiles.

Spot rubber flared up on Friday. Sheet rubber RSS 4 moved up to Rs 76.50 from Rs.75.50 a kg, while the market made all-round improvement even in the absence of enquires from the major manufacturers. The volumes were comparatively better.
The April futures for RSS 4 firmed up to Rs 77.99 (Rs 77.50), May to Rs 79 (Rs 78.56), June to Rs 79.99 (Rs 79.67) and July to Rs 79.95 (Rs 79.80) a kg on National Multi Commodity Exchange (NMCE).

Towards weekend in global markets, RSS 3 slipped further to Rs 73.37 (Rs 73.81) a kg on Singapore Commodity Exchange. The grade’s spot weakened to Rs 73.68 (Rs 74.43) a kg at Bangkok. The physical rubber rates were: RSS-4: 76.50 (75.50), RSS-5: 75 (74), Ungraded: 73.50 (73), ISNR 20: 74 (73.50), and Latex 60%: 57.50 (57).
Meanwhile, India’s Rubber Board has raised alarm against the rapid growth in tyre imports mainly from China. A steady trend with an slight upward bias could be expected for rubber next week.

Base metals
Base metal prices are moving higher on the back of a weaker dollar and stable equities as both these factors have improved market sentiments. A weaker dollar makes base metals look attractive for holders of other currencies. This is providing a strong support to base metal prices but the upside could be capped as LME inventories have touched a 15-year high. The base metals market is in an oversupply situation and fundamentals look bearish. However, the current rise in base metal prices is mainly due to technical buying and short-covering. In the coming week, base metal prices are expected to remain volatile as the US is expected to announce economic data like existing home sales, new home sales, 4Q GDP, personal income and spending.

Soybean
Refined soy oil futures fell sharply during the last week as government of India scrapped import duty on soy oil to reduce premium over palm oil. Government of India extended ban on exports of edible oil. Last year, Govt. of India had banned export soy oil in March to control rise in price. According to the Solvent Extractor’s Association of India, India‘s import of edible oil increased to 7,30,094 metric tonnes in February, 2009, up 69.40% as compared to last year during the same period. Edible oil imports in the first four months of oil marketing year (November to February) was 28,24,941 metric tonnes, up 87% as compared to 15,12,695 metric tonnes during the same period last year. PEC Ltd. has floated two separate tenders for the local sales of 3161 metric tonnes of crude soy oil. PEC is authorized by the government of India to import edible oils and sales the local market. Global vegetable oil prices may still fall due to ample global supply. In the coming week, prices are expected to move lower on account of higher import of edible oil and scrapped import duty on soybean oil. NCDEX April Refined Soy Oil has support at 430/422 and resistance is seen at 452/460 levels in this week.

Other Edible Oil
India’s edible oil and oilseeds Futures recovered from their lower level tracking the global markets. The Bursa Malaysia Derivative making decent gains in the past few days and CBOT’s projection aided market sentiments. It was a firm trend in crude palm oil that lend support to the oil seeds complex. The June Contract closed at 1985 a gain of 74. Nymex Crude Oil has support at US $51 per barrel.
Mustard Seed and castor seed tracked the gains in soybean and ended on a mixed to higher note in physical, Futures markets

Turmeric
Spot prices at Erode and Nizamabad over the past couple of days are being quoted at higher rates due to better offtakes at the domestic market. Prices in the previous week were quoted in the range of Rs. 4,200-4,350/qtl. Even though the arrivals are more offtakes are equally better due to domestic buying. Arrivals on an average in the previous week were around 25,000 bags daily in both the major mandis of Nizamabad and Erode. Fear of lower availability of Turmeric in 2009 is supporting the prices to strengthen. Demand from the domestic market especially from local stockists is present but the overseas demand has reduced as the prices are at higher levels. Farmers are hoarding the stocks and not bringing in fresh turmeric to the market in good quantity in order to reap maximum profits. Turmeric Futures April 09 contract touched a high of Rs.5,090/qtl tracking spot prices. Prices are ruling at higher levels thus cautious trading is advisable at futures. Prices have initial support at Rs.4,840/qtl and thereafter at Rs.4,700/qtl. Resistance could be seen at Rs.5,205/qtl and thereafter at Rs. 5,395/qtl.

Sugar
Sugar market declined sharply by 15% in the last 3-4 weeks as the Indian government has adopted various measures to curb spiraling Sugar prices. Besides imposition of stock limits and duty free impost of Raw Sugar, Government is now considering a proposal to let state-run trading companies import refined sugar at zero duty to bridge the widening gap between demand and supply. Final decision by the cabinet regarding the duty free imports of refined Sugar is expected in the coming week. India will have to import 3 million tonnes of Sugar to meet its domestic consumption of 22.5-23 million tonne. But imported sugar is much more expensive than local sweeteners at present, making the imports unviable. Thus, despite government’s effort to ease import norms, we don’t expect imports to take place in the coming months. Any significant decline in the prices should be treated as a good buying opportunity as Overall, fundamentals remain supportive for the prices with lower output forecast in India and a global deficit of more than 4.3 million tonnes. April Sugar futures are currently trading at around Rs. 2035 levels. Prices are having initial support at Rs. 1995 and then 1953. Resistance could be seen at Rs. 2080/qtl and thereafter Rs. 2120/qtl.

Black Pepper
The undertone in the Black Pepper spot and futures counter this week was steady due to increased buying interest and aided by a tight supply position. Indian parity in the international market was at $2,225-2,325 a tonne (c&f) as the rupee has strengthened against the dollar on Wednesday. Overseas reports on Wednesday said that Brazil was firmer and exporters appeared to reluctant to offer. B Asta was said to have been offered at $2,000 a tonne while B1 at $1,900 a tonne (fob).

Vietnam was reportedly steady at $1,800 a tonne for faq 500 GL. More buying interest was seen for black and white pepper from industry albeit for nearby deliveries. Lasta was being offered on replacement basis at $2,200-2,250 a tonne (fob). New Indonesian crop is said to be lower at 15,000 tonne against an estimated 30,000 tonnes last season. However, some substantial quantity of carry over stock is reportedly available therein the hands of middlemen and exporters.

In the weekend the physical counter traded steady amidst good underlying buying interest. The domestic as well as the overseas buyers from Europe were active. The stock availability remained low inducing the Indian traders to purchase from other cheaper origin like Indonesia at $2100/tonne fob. At the benchmark Kochi markets berries were offered at Rs.10300/qtl for the ungarbled variety and 10800/qtl for the garbled variety, steady as that of prior trading session. Around 33.5 tonnes were sold for the arrivals of 25 tonnes. Strengthening rupee against dollar pushed up Indian parity to $2300/tonne f.o.b while VASTA was offered at $2150/tonne and BASTA at $1950/tonne f.o.b. Pepper is likely to trade weak during early hours with the possibility of late recovery.