COMMODITY WEEKLY OUTLOOK 15-20 JULY’2013

BULLION

This week might prove to be a crucial week for gold prices as it strength remain on the higher side on the back of Fed chairman’s announcement of continuance of monetary stimulus program, the economic slowdown in China and the expectation of fall in the GDP and the rising of borrowing cost in Spain and Portugal. The economic indicators around the globe may also support gold prices to remain at the higher side. As of the derivatives point of view, prices have increased while the volumes and open interest have declined which indicates that the investors are doing short selling and may involve in the intraday trading. It also demonstrates that new money can enter into the market with the introduction of new investors which might increase the price. Consequently gold prices might remain on the higher side in this week.

Commencing the Euro zone, the apprehension of rising borrowing cost of Spain and Portugal might weaken the other riskier assets and gold prices might extend its gains. Portuguese have a loan of cost surged due to the political tension prevailing in the economy which might prompt investors to invest in gold instead of other riskier asset. Spain’s medium term have a loan of cost has increased amidst concern of political turmoil over its neighbor Portugal. The political indecision has around the euro zone has affected Spain and sent its bond yields up. For that reason gold prices might remain on the higher side on the back of pressure on the other asset classes. From the US, the Fed chief Bernanke’s speech might affect the gold prices in this week. In his speech last week, Bernanke stated that the monetary stimulus program would be continued in order to spur the economic growth. As a result gold prices would take cues from Bernanke’s speech and might trade up in the coming session.

Silver prices in this week might remain at a higher side on the back of economic indicators and the last week’s activities which might extend the gains in the silver prices. Fed chairman’s statement which hold up the silver prices last week as the chief stated that the monetary policy would be sustained in order to spur the economic growth in the US economy. As of the derivatives point of view, prices have increased while volumes and open interest have declined which indicates that the investors are involved in doing intraday trading. It also point out that the new investors can enter into the market and fresh buying may support the silver prices to trade up. Consequently Silver prices might rise in this week. The euro zone consumer price index is expected to rise along with trade balance which would extend gains in the shared currency and support silver prices to trade up. Too the euro zone current account would remain positive which might extend the gains in the silver prices. In addition the concern of increase in the borrowing costs of Spain and Portugal might extend the gains in the silver prices.

As of the US, Fed’s decision on continuance of monetary easing might extend gains in this week as well. Also the financial data from the US might also support silver prices to trade up. Consequently it is expected that the silver prices might take cues from the Fed’s speech which favored the monetary stimulus program to continue.

Mcx Gold Aug Weekly Levels:

Gold Resistance on Upper Side at 27102-27466-27829

Gold Support on Lower Side at 26131-25524-25160

Trend Deciding Point at 26495

Mcx Silver Sep Weekly Levels:

Silver Resistance on Upper Side at 42322-43144-43966

Silver at Support on Lower Side at 40304-39108-28286

Trend Deciding Level at 41126

BASE METALS

Previous week, markets witnessed the lower global growth forecast by the International Monetary Fund (IMF) from an existing 3.3 percent to 3.1 percent along with weak industrial production figures from Europe, India and UK. Base metals remained initially weak in the first couple of days on the back of the above concern coupled with higher dollar. On the other hand, on Wednesday the Fed Chairman Bernanke hinted on continuation of loose monetary policy and supported higher base metals prices. Overall metals gained in the range of 2.07% to 4.36% with aluminum as the top gainer.

Match up to last week, the fundamental side of base metals has showed a marginal improvement as stocks have declined in the range of 0.14 percent to 2.91 percent at the LME, apart from nickel (stocks have increased by 0.33% after increasing 3.35% in the past week) on a weekly basis. Shanghai warehouse stocks have also declined by 2-3% except zinc. On the other hand the cancelled warrants at the LME have declined for most of the metals and should limit the drastic gains in base metals. Following the assurance of the loose monetary policy by the ECB and the Federal Reserve, we anticipate the gains in base metals should remain in the coming week; On the other hand at the beginning of the week we anticipate the markets to remain concerned on Chinese GDP. The Chinese GDP is likely to remain much below the last year’s growth rate and we expect a level of 7 percent should aggravate the concerns of Chinese slowdown and limit the gains in base metals at the beginning of the week. As the week progresses, we have a bunch of positive releases from euro-zone and US in the form of improving advanced retail sales, housing permit and building construction from US and higher trade balance and current account balance from euro-zone. We consider, better economic releases amidst a weak dollar should continue to fuel gains in base metals as the week progresses. Even though the long term bearish trend in base metals is likely to remain intact, we anticipate metals pack should continue to take the benefit of loose monetary policy and better economic releases. The Fed Chairman is also scheduled to testify the monetary policy and outlook for the economy to the US congress and this should also support weakness in the dollar and support higher metal prices. At our household front, the rupee should also remain weak on the back of weak industrial activity and higher wholesale price inflation which should continue to support the gains in MCX base metals prices. Overall we recommend buying at dips due to the concerns of Chinese slowdown however major gains in base metals might not be expected similar to last week on the back of higher supply and growing dependence on loose monetary policy.

Mcx Copper Aug Weekly Levels:

Copper Resistance on Upper Side at 429-437-446

Copper Support on Lower Side at 408-397-388

Trend Deciding Point at 417

Mcx Nickel July Weekly Levels:

Nickel Resistance on Upper Side at 835-847-859

Nickel Support on Lower Side at 804-785-723

Trend Deciding Point at 816

Mcx Lead July Weekly Levels:

Lead Resistance on Upper Side at 127-129-131

Lead Support on Lower Side at 122-119-117

Trend Deciding Point at 124

Mcx Zinc July Weekly Levels:

Zinc Resistance on Upper Side at 115-116-118

Zinc Support on Lower Side at 111-109-107

Trend Deciding Point at 112.50

Energy:

We encompass been maintaining our broad bullish outlook on Crude oil prices for long-ago couple of weeks now and are expecting a similar trend to continue in the approaching week. On the other hand, post more than 14 percent rise in past one and half month which propelled WTI Crude prices for September delivery to over $105 a barrel from near $92 a barrel level in the June first week, we consider the pace of uptick in the black liquid might just reduce a bit. On one aside as WTI oil stepped up 14.4 percent since June, Crude price at the MCX Commodity exchange jumped 19 percent to finish firmly above the Rs 6300 mark as equated to just Rs 5300 level during the start of July. Superior gains in the local markets are mainly due to the sharp depreciation in the Indian Rupee against the US Dollar during the same time locally.

Crude Oil prices comprehensive their upward movement in the past week led by bullish fundamental factors, particularly from the US. US is going through its summer driving season which lasts between June to September and is a major driver for crude demand, particularly gasoline as people go for vacations and long-driving enhancing the consumption for oil in the world’s largest economy globally. These, the length of with the issues pertaining to fresh political tension in Egypt have also been important cues behind the smart rally in crude oil prices globally. Throughout the week under review, WTI oil for September delivery advanced 2.4 percent though Crude oil price at the MCX exchange for August delivery, established lower by 0.6 percent at Rs 6340 levels. This time the deficit in the local prices was due to over a percent appreciation in the Indian Rupee to the Dollar.

Crude oil prices at the Nymex stride up in trade after the US government data showed; crude oil stockpiles fell more than expected last week. Crude Oil prices gained as the Energy Information Administration (EIA) said, total crude oil inventories slipped 9.87 Mln barrel for the week ended July 5 to 373.92 Mln barrels; a way higher drop than average Street’s prospect of a fall in inventory by near 3.5 Mln barrel. The length of with this, the Gasoline stockpiles also fell by 2.63 Mln barrels that too nearly double of opportunity of a fall around 1.2 Mln barrel; On the other hand, on expected lines, Distillate stockpiles greater than before by near 3 Mln barrels. In addition, the Refinery utilization rate better to 92.4 percent as compared to preceding week’s number of 92.2 percent and an effect of higher demand in the system.

In general drawdown in inventory is in-line with our broad outlook of augment in crude oil expenditure in the summer driving season. The reported inventory by the government agency followed the private funded API report, which late Tuesday reported a similar 9 Mln barrel drop in total crude stockpiles and pushing oil prices higher.

Additional than the specific fundamentals of oil, US Dollar was also a big determinant for the smart gains in oil prices in last week though it infused high instability particularly in the middle sessions of the week. The Greenback comprehensive its rise during the start of the week and on Wednesday; the Dollar index hit a fresh three year high against the basket of 6 currencies touching 84.75 levels, indirectly putting some pressure on oil prices. On the other hand, on Wednesday evening, the US Fed meeting minutes came which suggested that large number of members inside the Fed is against any reduction in asset acquiring in the near term. Adding to the above statements, the US Fed Chairman Ben Bernanke in a conference in Cambridge unexpectedly commented that the central bank is not looking for a very short -term exit in its bond buying program. These cues pressed the US Dollar lower during the latter half of the week to finish at 82.95 levels, down by 1.78 percent for the week. Weakness in the US Dollar provided additional support to the oil prices in the last two trading days of the week internationally.

Mcx Crude Oil July Weekly Levels:

Crude Resistance on Upper Side at 6464-6573-6682

Crude Support on Lower Side at 6201-6047-5938

Trend Deciding Level at 6318

Mcx Natural Gas July Weekly Levels:

Natural Gas Resistance on Upper Side at 227-235-243

Natural Gas Support on Lower Side at 213-207-199

Trend Deciding Level at 221

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Economic Data for This Week: