Bullion and Energy Weekly Outlook and Commodity Tips

As of 6 PM IST spot gold traded down at $1197 down by 3.30% from its previous week’s close. Likewise, Indian gold prices too traded down at Rs. 28,430 down by 3.42%. There is a slight divergence in gold price performance in the two platforms as locally Indian rupee appreciated a tad against the US dollar. We would not cite any other reasons for price fall in gold except that it declined majorly due to gains noticed in the US dollar post Fed took a stance on cutting down its bond purchase programme from $85 to $75 billion US dollar. We believe bullion market was mostly hit from this event. In fact other precious metals group (PGM) also declined. Interestingly when US dollar surged euro currency too declined along with gold which eventually developed a better correlation between gold and euro. Meanwhile, the economic releases coming out from the US were also very striking, naming a few would be the better than expected housing numbers prompted gold prices to fall. If we look at the participation rate on gold in the global futures market volumes have increased substantially in the last week along with moderately increase in the open interest with fall in prices suggesting the weakness may continue to prevail in the market. From the investment front holdings at the world’s largest ETF the SPDR backed by gold remained lower at 808.72 tons down by 2.28%. This has been a continuous event in the westerns that the investment demand in gold continues to be lower. During the last few months we had seen slight improvement in the gold prices especially during seasonal demand from India and China however, that factor has been also faded now. So, globally gold demand is low and likely that weakness may continue in the market for at least short term. Along with Fed’s tapering story has also provoked more selling in gold. We believe gold prices may remain lower in the next week too. However, for the next week we wish to develop two stances on gold. A) Either gold price may continue to plunge sharply by breaking the previous low of $1179 and head towards $1160 supported by weak fundamentals and rising US dollar. B) The price performance of gold could be lackluster ahead of year ending. In the next week 24th is expected to be an early market closing in the US while 25th would remain closed across the globe so participation may remain subdued. Overall, we hold a bearish view on gold for the next week. As far as local gold prices are concerned we recommend remaining in sell side while rupee could bring in slight vulnerability in the market or the losses could be minimal


As of 7 PM IST spot silver is seen trading at $19.40 down by 0.95% from its previous week’s close. Likewise, at the domestic market silver prices too traded down and while writing this report silver is seen trading at Rs. 44,065 per Kg down by 1.6%. Like gold silver prices too corrected down due to appreciation in the US dollar however, fall was bit lower for silver as the global equities except China remained higher and the base metals traded mixed. As discussed in the gold section silver prices along with other precious metals were mostly down due to Fed’s tapering decision. Meanwhile, the overall trend has been bearish for silver so we believe it may continue to weigh on the prices in the next week. However, ahead of year ending close and Christmas holiday possibly markets may remain subdued so the volumes could also be thin. Hence, we though adopting a sell view but profit potential could be minimal.


There are no major cues expected from euro zone in the next week and a few economic data are expected from the US and durable goods order data could be important. Overall the trend in the commodity which usually is a high beta one got support from the mixed to positive closing in the base metals side. This was the factor which helped the whitish precious metal to be marginally better than gold, against its normal movement. Nonetheless, the broader direction in commodity is continuously derived from the movement in the latter. We feel, Silver take minor cues from weakness Asian equities especially china which particularly on Friday plunged over 5% amidst fresh concerns of tight liquidity. There is a higher possibly of silver prices continuing to trade down in the next week and we might also see it to again under-perform the yellow metal.


Crude oil for most active February expiry traded on a bullish note for larger part of the week and currently is hovering near the $99 per barrel mark. Oil prices inched higher as markets took positivity out of the US Fed monetary policy while broadly the US weekly crude inventory data continued to fill-in optimism about the overall demand pattern in the country. In the Indian markets, Crude oil for most active January expiry at the MCX were standing at Rs 6194 per barrel (Friday evening IST), higher by nearly 1.75% for the week. Marginally lower performance on the domestic front was due to the small appreciation in the Indian Rupee against the US Dollar.

On Tuesday late night, post the closure of our markets the US Private sector major, API (American Petroleum Institute) came-in with the inventory report wherein the agency said crude stocks fell 2.5 million barrels for the week ended 13th December while added optimism was provided by the product related stocks wherein both stood lower than anticipated. Later the more important report was published by the US DoE (Department of Energy) which showed crude inventories slipped 2.9 million barrels while some cushion came from the distillate stocks which dipped more than 2 million barrels. Though the gasoline stocks advanced, this negativism was further over-took by the fall in stocks at Cushing, the delivery point for WTI. We continue to maintain our moderate bullish bias with regards to the inventory scenario in the US in coming weeks. As the winter season continues to increase, demand for distillate and other related fuels would continue to rise and indirectly add to crude oil consumption.

In other commodity specific cues during the latter half of the week, the US based API came out with its monthly energy tale, wherever the agency said that fuel consumption in the country increased in November to its highest level for this month in the last 6 years. The entire deliveries of petroleum yield rise 4.9% Y/Y to 19.4 MBPD. On a YTD scenario, the fuel consumption averaged 18.7 MBPD higher by 1.7% from 2012.

Amongst the major updations on the economy and monetary policy front last week, the US Fed announced to reduce its stimulus programme by $10 Billion from $85 billion to $75 Billion. Though the trimming down of the bond purchase program is an indication that slowly and steadily markets could see lower liquidity; it still infused positivity amongst the broader asset classes as this shows the confidence of the US Fed on the economy.

Next week, we have few economic cues to be watched from the US and Europe. From the US, broader numbers of consumer confidence, spending and income along with the manufacturing and housing sector related cues are likely to continue build up confidence into the economy and should support oil prices, at-least as per the trading direction is concerned. Detailed review and outlook over the global economy is provided in our weekly economy report

For the broader markets, including crude oil the worry would be the truncated part wherein we have Christmas holiday and also early closing would be observed on 24th. Also this being the last week ahead of the New Year, we could see higher than normal volatility amongst markets with lower participation. While the overall trading bias into the Commodity continued to be on the bullish side, we recommend traders to tread caution while trading next week

Commodity Tips

Gold Mcx Feb Sell On Rise near 28625-28650 sl 29000 Tgt 28250-28000

Crude Oil Mcx Jan Buy on Dips near 6140-6120 sl 6030 Tgt 6250-6300