COMMODITY MARKET TREND-1 Feb 2014

 Gold..............

Gold surprised investors turning upwards this week to end at 1265.40 against expectations for a decline to the 1220 level. Many Japanese investors are turning from the yen and buying gold as a hedge against inflation and wealth preservation as the Japanese economy turns towards inflation. Gold is on track to record a fifth straight weekly gain for the first time since September 2012. But investors are still wary of a market that took its biggest tumble in more than 30 years in 2013. The world’s largest gold-backed ETF, New York’s SPDR Gold Shares, said its  holdings declined by 5.4 tonnes on Thursday, bringing its outflow for the week to 6.6 tonnes. It logged its first weekly inflow since early November last week.Chinese demand eased, with premiums on the Shanghai Gold Exchange dropping to $10 an ounce from $12 the previous day over a possible easing of restrictions on bullion imports. This quarter, gold prices could rise 5% to $1,330, owing to strong physical buying and robust fabrication demand, a Thomson Reuters GFMS study has said. “It is possible for gold to touch $1,330 before the current quarter is over. While private investors showed a voracious appetite for gold in the wake of a sharp drop in prices, professional investors were absent from active buying, a trend expected to persist through this year. But a short-covering rally in the first quarter of this year isn’t being ruled out and this could contribute to the recent stabilization at a little more than $1,185. Tapering of the bond-buying programme in the US by the Federal Reserve didn’t have a major impact on the gold market, as prices fell in the second quarter. The result was while exchange-traded fund (ETF) investors sold 880 tonnes through 2013, bar hoarding in East Asia, the Indian sub-continent and West Asia stood at 1,066 tons. It is expected tapering in the US will continue till the end of this year and by then, some interest rate guidance is expected to emerge. Improving economic fundamentals are expected to continue to improve investor appetite for risk and prevent hefty gold investment.

SILVER ................

 
Silver prices tumbled on Friday to trade at 19.978 after topping 20.398 on Monday. Precious metals steadily increased this week while industrial metals bounced around with silver seeing huge increases and decreases day to day. The Fed’s bond-buying programme has increased liquidity in markets, which in turn has helped support commodities prices. Fed policymakers will meet next Tuesday and Wednesday.

CRUDE OIL ........

 
Crude Oil prices soared this week moving from the opening at 94.31 on Monday to close the week at 96.65 on implied demands and strong global growth after the IMF and the World Bank increased GDP for 2014 and 2015. The IEA also increased its forecast for demand over the balance of the year. Brent Oil on the other hand declined at the end of the week. Brent oil prices tumbled below $107 a barrel, tracking a sharp sell-off in stocks and emerging markets as worries mounted over an economic slowdown in China. Expectations that the US Federal Reserve will taper its stimulus package next week were also weighing on prices. China’s factory sector shrank in January for the first time in six months, a preliminary survey showed on Thursday, suggesting a weak start for the economy in 2014. Investors fled markets in Asia and Latin America, fearing the impact of slower growth in China and on expectations the Fed will cut further its bond-buying stimulus at a policy meeting next week. Brent and US oil futures had started the day strongly as bitter cold in the US sapped stockpiles of crude and distillates in the world’s largest consumer of oil and drew heating oil imports from Europe, Russia and Asia.

NATURAL GAS........

 
Natural Gas broke the $5.00 resistance level for the first time in many months as cold weather across the US and increased demand helped support prices while lower inventory stocks helped prices gain. Natural gas opened the week at 4.247 to hit a high of 5.024. Over the past couple of years, cheap gas has inspired many utilities to turn away from coal, a move that hurt railroads’ profits. And natural gas is becoming more widely used in transportation. More than 100,000 buses, trucks and other vehicles already run on it, although that figure represents only about 3% of the transportation sector. Friday, the price in the futures marketsoared to over $5.00 per 1,000 cubic feet, up 10 percent to the highest level in 3½ years. The price of natural gas is up 29 percent in two weeks, and is 50 percent higher than last year at this time. Record amounts of natural gas are being burned for heat and electricity. Meanwhile, it’s so cold that drillers are struggling to
produce enough to keep up with the high demand. So much natural gas is coming out of storage that the Energy Department says supplies have fallen 20% below a year ago — and that was before this latest cold spell.

COPPER .........

Copper fell to its lowest in a month on Friday and struck its biggest weekly fall since mid-November as slowing growth in China’s factories fuelled worries about demand in the world’s top metals consumer. 3 month copper on the LME ended at $7,180 a ton, its lowest level in a month and down from a close of $7,292 on Thursday. The metal is down 2% for the week. Weaker domestic and overseas demand in January hurt Chinese factory output and drove the Flash Markit/HSBC purchasing managers’ index to 49.6 in its first contraction in 6 months. A reading above 50 indicates growth. On Friday meanwhile, a global flight from emerging market assets gathered pace as investors worried about the impact of slower growth in China, U.S. monetary policy and political problems in Turkey, Argentina and Ukraine. Limiting losses in copper however, was news that several Chilean ports were on strike, curbing metal, fruit and other shipments from the country that accounts for about a third of the world’s copper supply. Still, nearby tightness in the physical market continues to ease, shown by LME forward spreads, as buying winds down ahead of the Chinese Lunar New Year, which begins next Friday.

COMMODITY PICK OF THE WEEK: NICKEL

MCX NICKEL January as seen in the weekly chart above has opened the week at 895.50  level initially moved sharply higher as it crossed crucial resistance level of 907.50. Later prices rallied sharply and finally closed at 898.20 after making a high of 914.50, sharply up from the previous week closing level 906.80. For the next week, Nickel prices expected to find support in the range of 891 TO 887 levels & finally towards the strong support near 882 TO 878 levels. Resistance is observed in the range of 928 TO 935 levels & then finally towards the strong resistance at 945 to 950 levels. Overall, the trend is looking bullish for Nickel Jan contract. This also got support as it crossed 50% Fibonacci Retracement & also from previous chart formation studies. 

WEEKLY RECOMMENDATION: BUY NICKEL JANUARY MCX NEAR 908 TO 910 FOR TARGET OF 935 TO 940 WITH SL OF 890 TO 885.

COMMODITY PICK OF THE WEEK: NATURAL GAS

MCX NATURAL GAS January as seen in the weekly chart above has opened the week at 265 level initially moved sharply higher as it crossed crucial resistance level of 281 & 295. Later prices rallied sharply and finally closed at 319.90, sharply up from the previous week closing level 276.70. For the next week, Natural Gas prices expected to find support in the range of 305 to 298 levels & finally towards the strong support near 285 to 281 levels. Resistance is observed in the range of 325 to 330 levels & then finally towards the strong resistance at 340 level. Overall, the trend is looking highly bullish for Jan as well as Feb contract. 

WEEKLY RECOMMENDATION: BUY NATURAL GAS JANUARY MCX ABOVE 313 FOR TARGET OF 325 & ABOVE IT 340 WITH SL OF 298.

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