Gold Commodity we are still not intending to change our enduring bearish stance while we believe in the next week gold price performance may remain lackluster. In one hand most of the global markets would remain closed, especially on 1st of January 2014 on the eve of New Year while trade participation may also be low in the next week. There are two perspectives we wish to cite here on gold trading in the next week. A) Ever since Fed declared tapering of its bond purchase programme most of the riskier assets such as equities are surging dramatically higher weighing on gold to remain lower. We believe so soon the trend may not change and gold prices may continue to remain lower. B) The investment demand is expected to be further lower in the western countries which is likely to keep prices under pressure. Also, the trading participation may continue to be dull in the next week. So overall, we believe gold prices may continue to drop in the next week. Looking at the economic data, we have a few from the US which are mostly likely to be supportive for the US dollar in turn that could bring gold prices further down. The detailed economic data are explained in our weekly economic analysis report. Likewise, if we talk about euro currency performance, it has been highly diverged to gold price performance. However, any change in the euro currency may have least impact on gold. Nonetheless, we carry a marginally bearish view on euro in the next week which may have a meandering impact on gold prices. So overall, we expect gold prices at the global market to remain lower while we do not expect any huge movement to take place. Looking at the domestic market, the performance may also stay jittery but losses could extend due to Indian rupee appreciation.
Silver Commodity may continue to outperform gold in the next week too. As discussed, as long as global equities continue to trade higher and some of the base metals to trade strong silver may remain higher. Therefore, we hold a positive outlook on silver. However, the overall bearish trend on silver has yet not been changed so price gains could be minimal. As also explained in our weekly global economic research report and in the gold section there are a few data expected from the US and Europe and likely that some of the data from the US in the form of housing number could bring in volatility on silver prices. In a different background we also wish to narrate that any surprises in gold performance on a bearish note then potential gains in silver could also be muted. So, we believe silver prices might either remain in a subdued trend or after an initial price gain it may eventually trade down. Looking at such scenario we suggest being cautious while trading in silver as part of positional trade whiles it could be a preferred commodity for intraday trade. Lastly, we also suggest making a ratio strategy on gold and silver in the next week where in we recommend selling in the former and buying the latter. The gold and silver ratio had moved down sharply in the last week from 62.37 to 60.85 which is also expected to remain close to 60
Crude Commodity will be amongst other updations for the commodity from the global space; tensions once again broke in the Middle-east and African region. There are reports of violence in South Sudan where the unrest between government and rebel groups has probable lead to losses in oil supplies of upto 200,000 barrels per day (BPD). Separately, in Libya oil production is running at a mere 250,000 BPD jus t10% of near 1.5 MBPD of oil which was being pumped into the country during t middle of this year.
However, as the issues have been revolving into these states for quite some time now, particularly in Libya there was no major impact on the global oil markets. In-fact, the Brent marginally underperformed the WTI this week with gains of just 0.1% to $111.90 per barrel as per latest available quote. The spread between the two contracts stood near $12 per barrel and has hovered around the similar range for last three weeks now. We don’t expect any major movement as per the spread is concerned in the next week. Amidst, Christmas and ahead of New Year celebration, international markets were into a holiday mood last week which pressed the trading volumes to multi-month low. Last week we witnessed, trading volumes at the both NYMEX and ICE for WTI and Brent contracts both fell by over 70% last week clearly a sign of lesser participation though the Open interest was little changed as traders held their open long-short positions intact. We could see moderate improvement in volumes next week however they are likely to remain below the average level.
On the economic data perspective we again have less number of economic readings from either side of the Atlantic though most markets in the global arena would be having truncated week due to New Year Holiday. While larger part of economic cues are likely to remain on the positive side particularly the manufacturing related numbers in the US we don’t feel they would hold so much of fire-power as to drive prices strongly higher. Detailed analysis of our economic outlook is provided in our weekly economy report.
On the other side we continue to hold a moderate bullish stance on the weekly crude inventory front in the US, particularly as we move on to our base case of winter season being approaching in the country towards its peak in January. We are advising traders to watch for dips to go long in the commodity for small targets in the coming week.
BUY CRUDE OIL MCX JAN ON DIPS NEAR 6200 SL 6150 TGT 6270-6350 {OR} BUY CRUDE OIL MCX JAN ABOVE 6270 SL 6180 TGT 6350-6380
SELL GOLD MCX FEB ON RISE NEAR 28700-28800 SL 29100 TGT 28250
SELL SILVER MCX MAR ON RISE NEAR 45300-45350 SL 46300 TGT 44100-43600