Volatility will continue in commodities and equities but commodities
will continue to outperform other asset classes. The markets will be
impacted by the Eurozone crisis, US financial crisis, already the United
Nations has signaled a global recessionary threat in 2012-13.
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 commoditiesFalling
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 2012Gold
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 bullishSilver 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 OilCrude 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.
AgricultureIn
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
