MCX India Commodity Weekly Outlook 17-22 June’2013

BULLION:

This Coming Week, Gold prices witnessed a boost in prices. On the other hand, volumes and open interest declined, screening that the market is running out of traders who are willing to open or hold long positions. Traders are shut down both losing short positions and winning long positions. It is highly feasible that the market is set to retrace to its lower price at some point in the future. Consequently, gold prices might remain under pressure in this week. Commencing the economic releases point of view, gold prices may see a downside due to good economic releases from Europe and the US.

The euro-zone’s trade balance is anticipated to increase in the beginning of the coming week along with the consumer prices index which should support the shared currency against the dollar, leading to slight gains in gold prices. The German producer price index and manufacturing index are expected to increase on the back of a slow increase in utilization, which could extend the slight gains in the shared currency as well as gold. On the other hand, during the US hours, gold prices might remain under pressure. The Federal Reserve’s chairman and his fellow policy makers will be holding an FOMC meet where they would discuss the continuation of the current monetary stimulus program. This might pressurize gold prices. The economic releases such as consumer price index and housing starts are expected to remain high-quality for the economy, and support the dollar, pressurizing gold prices. Initial jobless claims and continuing claims are expected to decrease, which would give slight support to the dollar and weigh down on gold prices. As a result, volatility in gold prices is expected on the back of the FOMC meet and economic releases from the US, which are expected to be supportive for the US economy. Generally, we suggest remaining on the selling side for this week.

Silver prices traffic higher last week. Form the derivatives point of view, prices increased while volumes and open interest declined which shows that the market is running out of traders willing to open or hold their positions. Traders are liquidating their positions whether they are losing short positions or winning long positions. It is highly probable is that the market is set to go back over to a lower price at some point going forward. Consequently, silver prices might trade on a bearish note this week.

The euro-zone’s trade balance is expected to rise along with the consumer price index which would support the shared currency and cause silver prices to trade up. The German industrial production and manufacturing numbers are anticipated to increase at a slower pace, which would extend the gains in silver prices slightly. On the other hand, during the US session, the FOMC meet which would be based on the discussion whether to continue with the monetary easing or not. This valor support silver prices to trade up on the back of a weak dollar. The major concerns raised in the FOMC meet would be the continuation of monetary easing to spur economic growth whereas other economic release such as housing numbers might pressurize silver prices at the end of the week. As a result, we anticipate the volatility in the market might pressurize silver prices downside. General, we advise remaining on the selling side.

Mcx Gold Levels:

Gold Support on Lower Side at 27525-27180

Gold Resistance on Upper Side at 28240-28630

Trend: Sideways

Mcx Silver Levels:

Silver Support on Lower Side at 43500-41850

Silver Resistance on Upper Side at 44650-45400

Trend: Up

ENERGY:

Crude oil prices are anticipated to keep on their upside trend in the coming week due to concerns of supply disturbances backed by the rising tension from the Middle East. This week is predictable to start with a lot of expectation from the G8 summit which will be held on Monday and Tuesday where Syria will be on top of the agenda. On 14-06-2013  conference already saw discussions that President Bashar al Assad’s regime crossed a line by using “multiple” chemical weapons against opposition forces in Syria. The major focus will be on how the G8 countries should all agree to work together on a political transition to end the conflict. Russia, Syria’s closest ally, the US’ decision to arm rebels opposed to Mr Assad might stoke violence in the Middle East. Consequently, Crude oil prices are expected to take positive cues from this geopolitical tension at the beginning of the week. Additional fundamentals that have played out in the market last week are probable to continue, keeping prices higher in this week. The US summer driving season is likely to generate more demand for gasoline. According to the US Energy department, fuel demand in May has increased to 8.8 million barrels per day, more than 2% higher than the same time last year. Crude oil stocks are at 399 million barrels, the lowest level in the last 5 weeks due to increased refinery utilization to meet the summer driving demand. Gasoline stocks have declined, indicating that demand is increasing. We need to closely watch the weekly petroleum inventory numbers released by the US department of energy (DOE). Since the US official summer season began on 27th May, demand for gasoline and distillates might increase. As per the US Energy department, the number of cooling degree days will be above 245 in June, higher than the last year in the same month. So, the demand for space cooling purposes may increase and support oil prices. The hurricane season in the North Atlantic has already started with Hurricane Andrea hitting last week. We need to watch carefully for any update from the NHC regarding the formation of tropical storms which may create concerns of supply disturbances in the PADD-III region. Starting the fundamental front, we look ahead to oil to remain on an upside in this week.

The major occasion to watch for will be the FOMC’s rate decision on Wednesday, followed by two days of meet and conference by Ben Bernanke on US economy projections. We suppose the Fed will continue with the monetary easing program, keeping the dollar under pressure and supporting a rise in oil prices. Commencing the economic data front, housing data from the US and China are expected to increase. PMI numbers and the Zew survey numbers are likely to paint a better picture of the euro-zone. The regular economic data releases from the major nations are also predictable to paint a slightly positive picture and create speculation of higher fuel demand.

Mcx Crude Oil Levels:

Crude Support on Lower Side at 5621-5540

Crude Resistance on Upper Side at 5765-5854

Trend: Up

MCX WEEKLY TECHNICAL RECOMMENDATIONS:

BUY GOLD MCX AUGUST NEAR 27715-27680 SL 27465 TGT 27965-28200

BUY SILVER MCX JULY NEAR 43500-43450 SL 42900 TGT 44100-44600

SELL COPPER MCX JUNE NEAR 411-413 SL 420 TGT 402-397

BUY CRUDE OIL MCX JULY NEAR 5625-5600 SL 5540 TGT 5700-5765

ECONOMIC RELEASES OF THE WEEK: