Recently, central banks in China and some European countries have lowered their interest rates, focusing on growth, which augurs well for commodities.
Commodities witnessed $10 bn outflow of fund money in September but rebounded with $2.1 bn inflows in October. The outlook is still mixed for most commodities although precious metals may perform better in 2012. Commodities witnessed in January to April – net inflows of $24 bn (Compared to January –April 2010 inflows of $16 bn)
May to October 2011- Net outflow of $8.5 bn. May saw acute market volatility due to strengthening of Eurozone debt worries, US financial crisis.
Rupee depreciated 17.4% in 2011 against US Dollar , Euro, GBP fell by 5.3%-- to impact India’s imports, inflation and commodity markets. Domestic inflation may sustain on higher imported cost of oil, coal, metals, minerals. Export oriented IT, textiles to benefit.
Indian commodities
Falling financial institutional infows (FII) inflows suggest weak outlook on Indian economy, Foreign Direct Investment (FDI) inflows less volatile to Eurozone worries.
Key points: Rs 115 lakh crore turnover in commodity futures trading in 2010-11 representing 50 % growth The cumulative value of trade from 1st April, 2011 upto 31 st October, 2011 for the financial year 2011-12 was ` 106, 36,960.76 crore. Commodity trading volumes in India have risen close to 70% in April to November 15, 2011 at Rs 113 lakh crore compared to Rs 67.11 lakh cr in corresponding period last year.
It is observed that at least 20 per cent of capital market traders have added commodity to their trading pattern and out of them at least 7 per cent have shifted completely to commodities from equities. (based on three years of data collection by Commodity Online)
Gold Outlook: To touch 28700 by the end of 2011, 32500 by 2012
Gold will trade positive in 2012 driven by central bank buying, India China consumption, global macro-uncertainties and higher investment demand especially through exchange traded funds (ETFs).
Gold prices surged 28% to $1923.70 in September in 11th year of bull run and with US interest rates close to zero and continuing Eurozone debt crisis that adds to the safe haven appeal of gold. Gold has surged 38 percent this year, touching a record 29300 rupees per 10 grams in Indian market. Weak rupee may provide further support for prices. Commodity Online Research expects gold to touch Rs 28700 per 10 gms by end of this month and Rs 32,500 by 2012.
Gold held in ETFs globally has climbed to a record 2,358.206 metric tons on December 6.
Global gold demand in third quarter of 2011 was strong at 1,053.9 tonnes, an increase of 6% compared to the same period last year. This equates to US$57.7bn, an all-time high in value terms. This increase was driven by investment demand which rose by 33% year-on-year to 468.1 tonnes, generating record quarterly demand of US$25.6 bn. Healthy growth in jewellery demand and modest gains in demand from the technology sector were offset by a year-on-year decline in investment, principally from ETFs and similar products.
In India, latest industry report indicates that the average assets under management for Gold ETFs is more than Rs. 9000 Crores which indicates that Gold is emerging from the shadows of equity and debt with an identity of its own as a preferred investment opportunity.
Gold has risen 20 percent annually in the past four years. In 2011, Gold has given highest return of more than 35 percent in last 10 years. This year closing prices are expected in range of 28700-900 rupees. In 2012, first quarter, gold to touch Rs 31,600 per 10 gms.
Downside momentum is expected till 28200. Support – 26500, 27300, 28500 .Resistance – 30200, 31500, 32600.Recommendations : Buy Gold in range of 28500-28600 SL 27200. Target 31300, 32700
Silver to be moderately bullish
Silver prices may witness moderately bullish trends in 2012 on global macro-economic uncertainties and possible fall in industrial demand for the commodity. Investment demand may gain especially in India where the demand usually comes from farmers and rural households who store their savings in Silver bangles and coins. Depreciating rupee may weaken demand for precious metals as import costs rise. Higher prices may act as deterrent for buying in India.
In 2010, silver futures have outperformed all base metals and bullion commodities giving a return of 73%. Current market prices are trading in range of 55000-57000 rupees per kilogram in India.
Silver is also having direct relationship with Euro and inverse relationship with US dollar, as the movement of EURO is generally moving in negative direction with US dollar and most of the other currencies, we may face zig zag movement in the prices of silver.
MCX Silver will trade positive at 58526 levels in the coming weeks could rise to Rs 64000 per kg by February if it breaks Rs 60,000 levels or else it could fall to Rs 46000.
Silver futures climb to more than 56 percent to 73600 rupees per kilogram. After touching all time high levels, Silver dips to 46000 rupees as Euro zone debt crisis fear market condition. Silver move downside along with base metal complex.
Overall view for Silver is moderately bullish for coming year. Short term bearishness can be considered as buying opportunity to buy this white metal at dip. As the world economy worsens, its affects Industry demand for Silver. In case, down-trend continus, then Silver may touch bottom levels of 48000 and 42000 rupees in coming months. Supportive micro economical data will help Silver to move higher till 62000. Looking at the current market, we don’t expected much space in upper range for now.
Support : 48500, 52000, 55000
Resistance : 58000, 60000, 62500
Recommendations : Buy Silver in range of 51000-52000 SL 47000 Target 58000, 61500
Crude Oil
Crude oil prices may continue to remain bullish at the start of 2012 on geo-political tensions and possible production cuts by OPEC to be announced on December 14, 2011. Libyan production has resumed and is expected to come back to 1.6 mn barrels per day by end of 2012, but is still lags behind pre-civil war levels. Global oil demand is expected to decline on Eurozone debt crisis, US financial crisis and weakening of growth in emerging economies.
Hence, Crude Oil prices will trade in positive territory. MCX Crude Oil futures outlook is positive and may climb to Rs 5360 to Rs 5500 per barrel.
Base Metals to remain sluggish in 2012
Base metals will remain sluggish on slower rate of growth reported in China and Japan, the leading consumers of metals. In India, higher inflation rates, lower IIP data and lower GDP growth is dampening the base metals market.
The ongoing Eurozone sovereign debt crisis and tighter Chinese monetary policy appear to have also had an impact on demand and confidence.
LME Copper is down 18 percent this year, and is headed for its first annual decline since 2008 when a financial crisis tripped the global economy, with demand from top copper consumer China also far from aggressive. Aluminium capacity is being idled on lack of demand and higher energy curbs in China. Nickel has fallen significantly in 2011 among the all base metals from its high due to increasing concerns of global economy,low demand and increasing LME stocks.
Nickel will remain bullish for coming sessions and its expected to touch the level of Rs. 1006 which is expected to touch within couple of months.
Lead market is balanced in demand and supply scenario but goiing ahead into 2012 it we believe that supply side would be steadily increasing yet structural change announced by Chinese government should be watched properly as mojor Lead producers are being stopped.
Agriculture
In the agri front, some commodities have shown immense potential in its movement in Futures market while it has also given marginal profit to producers and farmers as well. Take for instance Guar Seed, the prices of which may extend the gains in near term on expectation of lower output in 2011-12 and lower carryover stocks along with robust export demand.
At the same time a commodity like Cardamom has prices have falling by Rs.670 per k.g – from 1580 to 609 -almost 170% down from last year closing. Higher production, and some carryover stocks are some of the reasons for downside in Cardamom.
Rubber prices have shown a firm trend in recent times and rising Crude Oil prices and adverse weather in Thailand had given support for prices. The Indian tyre industry demand for further import at concessional or zero duty has been ruled out by Finance Ministry which allowed 40,000 tonnes at concessional rate of 7.5%. China buying in January may push prices. Indian prices are consolidating at 20,000 levels and is looking for fresh triggers for upside gains. With a deficit of 75,000 metric tonnes forecast and growth in production of 2.5%, consumption by 2.5%, Rubber prices seem well supported at current levels.
In Pepper, domestic demand is moderate to strong and arrivals are weak these days. In long term, technically the break out of 37300 will take price higher to 39600 if volume supports. While in short-term the prices of future are expected to trade positive. Futures traders can enter into buying positions.
Strategic decisions in moving commodities can bring gains to Futures traders while in the case of physical traders, lack of storage facilities have put them in a dock to store agri commodities. Most traders in north are buying agri commodities and is taking advantage of the mushrooming cold storage facilities from Jaipur to Delhi corridor to store them for two to three years.
According to Futures Industry Association (FIA), number of contracts traded globally in futures and options is higher in agri-commodities compared to metals, energy and other categories.
curtsey www.commodityonline.com
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