MCX INDIA COMMODITY WEEKLY OUTLOOK 03-08 JUNE’2013

BULLION:

This week is departing to be crucial for gold due to the important economic releases from the US and Europe. The interest rate decision by Bank of England and European Central Bank would be the key events from Europe. From the US, Fed Reserve Beige Book would be the major event. Next week, euro zone should play a major part from the point of view of gold’s price performance. It is anticipated that euro would perform better in the beginning of the week on the back of IMF’s approval of second bailout to Greece. This would extend the gains in gold prices at the beginning. However in the mid of the week, euro zone GDP would remain negative which would pressurize the shared currency and gold prices might also come under stress. In addition the German trade balance would likely to remain weak on the anticipation of slowing consumption which would weigh down gold prices due to weakness of the euro. It is predictable that ECB would not go for further rate cut post the recent cut of 25 basis points in the beginning of the month of May. Therefore weak GDP number and weakness in German releases would pressurize the shared currency and extend downside in gold prices.

Commencing the US, the trade balance is likely to widen due to increase in imports in comparison to exports and this might pressurize the dollar and support the gains in gold prices at the beginning of the week. On the other hand, initial jobless claims and continuing claims are likely to remain positive for the US economy which might limit the gains in gold due to the strong US dollar. Markets would be eyeing the nonfarm payrolls on the first Friday of the month which are projected to be positive on the back of improvement in the labor sector and this should continue to strengthen the US dollar and may have a negative impact on gold prices. The unemployment rate is likely to remain at 7.5% with improving consumer credit and this would support the greenback against the major currencies which would extend the fall in gold prices in this week.

This Week Silver prices may take cues from the important releases from the globe in which Europe and US releases would be the major players. From the Euro zone, Germany and euro zone PMI manufacturing numbers are anticipated to be positive which would support the silver prices to trade up. On the other hand in the mid of the week, euro zone GDP is expected to decline which would pressurize the shared currency and extend the weakness in silver prices. Also the German trade balance and industrial production is likely to remain weak amidst slowing consumption and this should further support weakness in silver prices. Starting the US, ISM manufacturing is expected to be slightly negative whereas the nonfarm productivity would improve at a slower pace and this might continue to weaken silver prices for the time being. The nonfarm payrolls are expected to be positive on the back of improvement in the labor sector which would strengthen the dollar and weigh down the silver prices. Overall we recommend remaining on the selling side at higher levels in the coming week.

On the whole, we recommend bullion remaining on the selling side for this week.

Gold Weekly Outlook:

Projected High range for the Week: 27254-27808

Projected Low range for the Week: 27248-26694

Weekly Major Resistance on Upside: 27532-28085-28637

Weekly Major Support on Downside: 26423-25867-25314

Weekly Trend Deciding Point @ 26976

Silver Weekly Outlook:

Projected High range for the Week: 44215-45198

Projected Low range for the Week: 44653-43670

Weekly Major Resistance on Upside: 44634-45762-46890

Weekly Major Support on Downside: 42669-41832-40704

Weekly Trend Deciding Point @ 43797

BASE METALS:

This week is likely to be one of the most critical weeks for base metals. Ahead of the Chinese Dragon Boat Festival beginning from 10th June, most of the market participants might anticipate the Chinese demand to increase which should continue to support gains in base metals. Still it has been observed in the past couple of holiday season that ahead of Chinese holidays base metals have mostly fared weakness in prices due to lack of demand. We suppose, the Chinese demand to remain weak in the near term and do not expect stockpiling ahead of the holidays and this should continue to support weakness in copper and nickel prices. Lead and zinc along with aluminum have drastically gained last week, and we deem in this week the gains to continue on the back of rising vehicles sales in Japan and US. Higher demand for vehicles and increasing budget spending by the regional governments including the euro-zone member nations should continue to support gains in base metals. Resting on the back of slowing consumption and concerns of Fed tapering the quantitative easing, markets should eye the Chinese and US Presidents meet and any development by the top two economies of the world should have a significant impact on metal prices. Measure up to lead and zinc, copper and nickel are likely to remain weak in the coming days due to the following reasons:

A) Slowing Chinese demand (SHFE copper stocks increased by 1.52% compared to last week to 1, 79,317 MT while nickel stocks increased by 180MT at the LME bonded warehouses)

B) Higher supply is likely to limit the gains (Freeport would resume full operations by next week, while Sterlite industries with 4, 00,000 MT capacities would also restart its smelter after permission by the Indian Green Tribunal. Nickel supply is also likely to remain higher, however as noticed in the past due to buying at the beginning of the month by the Chinese steel mills, significant downside might not be witnessed. The manufacturing and industrial activity is likely to remain at a blend with slight improvement in Europe and US, however lower German factory orders and allowing demand should have a negative impact on copper as Germany remains the third largest consumer of the metal. Overall we expect base metals to remain mixed in the coming week as lead and zinc should continue to gain while copper and nickel might struggle. Market participants are recommended to remain cautious as volatility in prices might be witnessed on the back of ECB rate decision, Fed’s Beige book and non-farm payrolls releases..

Copper Weekly Outlook:

Projected High range for the Week: 413.85-419.65

Projected Low range for the Week: 412.65-406.85

Weekly Major Resistance on Upside: 416.95-422.35-427.75

Weekly Major Support on Downside: 405.35-399.15-393.75

Weekly Trend Deciding Point @ 410.75

ENERGY:

The oil fundamentals that have played in the market last week are expected to continue, keeping prices lower in this week too. We are not expectant any new development to be discussed in the near term related to oil supply as the OPEC has decided to keep the supply figure unchanged at 30MBPD, which is around 40% of world total oil supply. On the other hand, we need to closely watch the weekly petroleum inventory numbers released by department of energy (DOE), US. The only factor which might be a matter of concern is to not let prices fall substantially would be the gasoline stocks performance. Since, the US official summer season has begun in last week of May (27th May) might continue to create demand for gasoline and distillate gradually. The US summer is also termed as driving season where in gasoline and distillate demand rises in general. We could see in the last week’s inventory report, gasoline stocks declined from 3015 barrels to -1514 barrels. As well, once the temperatures soars in US there would be higher gasoline demand so we may look ahead to the refinery utilization rate might also rise gradually. Nonetheless, we anticipate the activities to be more intense during late June or early July rather than next week. As far as this week is concerned we deem crude-oil stocks should continue to rise; refinery utilization rate should also stay marginally higher but gasoline stocks should decline, keeping oil prices lower with higher price volatility. Another story which is now keeping oil market’s finger crossed is the shale oil production in US. U.S. crude production jumped 20 percent in a year to 7.37 million barrels a day in the week ended May 3, the highest level since February 1992, data from the U.S. Energy Department’s Energy Information Administration revealed. Courtesy: Bloomberg. This could be a serious threat to OPEC but it’s too early to expect OPEC would take any serious steps in near future.

From the fundamental front we believe oil should remain under pressure in the initial days of the week while there would be huge volatility in the prices. Since, OPEC basket rate has declined below $100 mark, possibly some more weakness should be expected in the near term.

Secondly, we have to also look at the economic activities that are likely to play out in the next week and their impact on oil price trend.

The Key events for the next week are as follows:  ECB interest rate decision, BOE rate decision, US non-farm payrolls, US Fed Beige book. The regular economic data are also expected from respective countries. Overall, we believe euro which posted a higher close this week is likely to prolong its gain in the early half of next week while later on it should weaken. Likewise, we are hoping US payroll numbers should be supportive for US helping USD to appreciate by the end of the week. There are quite a few economic releases expected from China and Japan which are likely to develop a mixed outlook on their respective countries. The detailed global economic analysis can be viewed in weekly economic analysis report.

Oil prices should remain bearish in this week while volatility would be noticed. We continue to hold a bearish outlook with defined stop loss. The next week would also be a deciding point for the entire summer season. The calendar spread between July and August is at $0.24 shows the short term trend is still bullish while in the very near term oil might remain under pressure. We continue to anticipate the spread to rise.

Crude Weekly Outlook:

Projected High range for the Week: 5302-5395

Projected Low range for the Week: 5362-5269

Weekly Major Resistance on Upside: 5339-5451-5563

Weekly Major Support on Downside: 5154-5081-4969

Weekly Trend Deciding Point @ 5266

MCX WEEKLY TECHNICAL RECOMMENDATIONS:

SELL GOLD MCX AUG NEAR 27040-27060 SL 27540 TGT 26540-26200

SELL SILVER MCX JULY NEAR 43800-43900 SL 44700 TGT 42900-42500

SELL COPPER MCX JUNE AROUND 411-413 SL 422 TGT 400-395

SELLCRUDE OIL MCX JUNE NEAR 5290-5310 SL 5385 TGT 5160-5082

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ECONOMIC RELEASES OF THE WEEK: