By Shyamal Mehta
MUMBAI (Commodity Online): US dollar becoming weak against major currencies lifted dollar denominated commodities higher last week as weak USD makes dollar denominated commodities less expensive for other currency holders.
Currencies
US dollar index lost 0.96 % on Friday last week while on weekly basis it fell by approximately 1.3%. While against Euro, the dollar fell by 1.4% for the week ended on 8th April, 2011. Dollar traded weak throughout the week against basket of major currencies. Euro became strong against US dollar as expected 25 basis point rate hiked by (ECB) European Central Bank. The ECB hiked interest rate from 1% to 1.25%.
The reason for decline in USD was mainly because of investors unwinded their positions from USD and shifted their focuss on riskier commodities on growing optimism of global economic recovery.
Even better than expected US jobless claims data could not provide support to the greenback.
Bullion
Gold prices were going up constantly in the last week. Gold future prices rose by approximately one percent on Friday last week while on weekly basis it settled at 1474.1 USD per ounce higher by more than three percent. Gold prices went up as dollar became weak which boosted the metal’s demand as an alternative asset and also because of inflation hedge as Crude also went up last week by approximately 4.5 percent.
Gold prices were rising in the last week on the back of speculative and investment demand and physical demand of Gold was not seen picking up in the last week.
Silver prices has tested multi year high levels above $40 per ounce and last traded at $40.6 per ounce. Silver prices gained by 2.6% on last Friday and more than 7.5 percent in the last week. Silver continued outperforming Gold from last three months and likely to give better returns in the coming months also as compared to Gold. Silver gained by more than 45% in last three months while Gold gave return of more than 10 percent in the said period. Silver prices are seen rising further and heading towards 44 dollar per ounce mark.
Gold and silver prices have risen in recent past was also because of investment demand from hedge fund houses where Silver prices have risen with abnormal speed which may trigger sell off and may fall on profit bookig and correct by 15-20 percent in near term.
Any correction in bullion prices is a good long term investment opportunity for investors as Gold and Silver prices are still in medium and long term uptrend. Gold prices are seen rising in next couple of years and may touch $1800-2000 per ounce. And Silver could test $ 55 per ounce levels in the next couple of years.
Long term investors can buy silver somewhere around $ 33-35 per ounce keeping a stop loss of 29 dollar mark and can wait for the targets of 48-55 levels in long term.
Energy
Crude settled on Friday at 112.79 USD per barrel up by 2.25 percent. Crude prices rosse because of improved global economic outlook. Also, oil producing countries wish to see Crude prices rising as US dollar becomes weak which reduces the revenues of Oil producing countries and so by this way they can offset their currency loss from the sell of oil. As weak dollar makes Crude oil cheaper for other countries whose currencies is appreciating against the dollar.
IMF also sees Crude prices are well supported and may rise further because of supply constraint and rising demand from emerging markets mainly from China.
Traders may see volatility in international currency and commodities markets in the weeks ahead.
Base Metals
Base metals traded strong and settled higher on LME during last week with gains ranges from approximately three to eight percent. Aluminium prices rose by more than three percent last week. While Copper, Lead and Zinc settled higher with gains of more than five percent. Nickel was the highest gainer with gain of approximately eight percent.
Fund buying was seen in all industrial metals across the board.
USD was trading weak against Euro and other major currencies in the last week which makes dollar denominated commodities cheaper for buyers of other currencies.
Euro became strong against US dollar as expected 25 basis point rate hike by ECB (European Central Bank).
Moreover, the greenback was under pressure on government shutdown news also because of dispute between Democrats and Republicans on cutting budget deficit.
Base metal prices have risen also because of expected reconstruction demand from Japan after earth quake and Tsunami last month. Prices went up on hope of global economic optimism indicates that metals demand from China, the major metal consumer will continue to rise. So if circumstances change then market may witness heavy sell off in base metal complex.
Copper inventories at LME went up by 1.2 percent in the last week ended on 08th April, 2011. Inventories levels of Lead and Nickel at LME fell by 1.4 and 2.2 percent respectively. While Aluminium stocks at LME fell by 0.22 percent for the last week. Inventories from LME witnessed decline last week was because of investment demand of metals.
Better than expected jobless claims data from US also played a good role in sending base metal prices northward.
However, according to some analysts, the current rally in base metals is not sustainable and metals are vulnerable for profit booking because of geopolitical concern in Middle East and Euro-zone sovereign debt issues.
Aluminium and Lead traded near three years high while Copper last traded at $ 9875 per tonner moving to its all time high near $ 10150 per tonne touched couple of months back. While 3 Months Lead and Nickel on LME last traded at USD 2850 per tonne and USD 27600 per tonne respectively. At LME, 3 Month Aluminium last traded at 2713 USD a tonne. Zinc 3 Month LME contract last traded at 2532 USD per tonne.
More monetary tightening from China to tame inflation may also reduce investment demand of industrial metals expecially Copper. Another headwind for base metals is high Crude prices which last traded near 113USD per barrel which is at 30 months high.
Metal prices are likely to find its direction from global stock markets and currency movements in the short term. Traders are waiting for series of economic data from US in next week like Federal Budget Balance, Retail Sales, Business Inventories, PPI, Unemployment Claims and Industrial Production.
MUMBAI (Commodity Online): US dollar becoming weak against major currencies lifted dollar denominated commodities higher last week as weak USD makes dollar denominated commodities less expensive for other currency holders.
Currencies
US dollar index lost 0.96 % on Friday last week while on weekly basis it fell by approximately 1.3%. While against Euro, the dollar fell by 1.4% for the week ended on 8th April, 2011. Dollar traded weak throughout the week against basket of major currencies. Euro became strong against US dollar as expected 25 basis point rate hiked by (ECB) European Central Bank. The ECB hiked interest rate from 1% to 1.25%.
The reason for decline in USD was mainly because of investors unwinded their positions from USD and shifted their focuss on riskier commodities on growing optimism of global economic recovery.
Even better than expected US jobless claims data could not provide support to the greenback.
Bullion
Gold prices were going up constantly in the last week. Gold future prices rose by approximately one percent on Friday last week while on weekly basis it settled at 1474.1 USD per ounce higher by more than three percent. Gold prices went up as dollar became weak which boosted the metal’s demand as an alternative asset and also because of inflation hedge as Crude also went up last week by approximately 4.5 percent.
Gold prices were rising in the last week on the back of speculative and investment demand and physical demand of Gold was not seen picking up in the last week.
Silver prices has tested multi year high levels above $40 per ounce and last traded at $40.6 per ounce. Silver prices gained by 2.6% on last Friday and more than 7.5 percent in the last week. Silver continued outperforming Gold from last three months and likely to give better returns in the coming months also as compared to Gold. Silver gained by more than 45% in last three months while Gold gave return of more than 10 percent in the said period. Silver prices are seen rising further and heading towards 44 dollar per ounce mark.
Gold and silver prices have risen in recent past was also because of investment demand from hedge fund houses where Silver prices have risen with abnormal speed which may trigger sell off and may fall on profit bookig and correct by 15-20 percent in near term.
Any correction in bullion prices is a good long term investment opportunity for investors as Gold and Silver prices are still in medium and long term uptrend. Gold prices are seen rising in next couple of years and may touch $1800-2000 per ounce. And Silver could test $ 55 per ounce levels in the next couple of years.
Long term investors can buy silver somewhere around $ 33-35 per ounce keeping a stop loss of 29 dollar mark and can wait for the targets of 48-55 levels in long term.
Energy
Crude settled on Friday at 112.79 USD per barrel up by 2.25 percent. Crude prices rosse because of improved global economic outlook. Also, oil producing countries wish to see Crude prices rising as US dollar becomes weak which reduces the revenues of Oil producing countries and so by this way they can offset their currency loss from the sell of oil. As weak dollar makes Crude oil cheaper for other countries whose currencies is appreciating against the dollar.
IMF also sees Crude prices are well supported and may rise further because of supply constraint and rising demand from emerging markets mainly from China.
Traders may see volatility in international currency and commodities markets in the weeks ahead.
Base Metals
Base metals traded strong and settled higher on LME during last week with gains ranges from approximately three to eight percent. Aluminium prices rose by more than three percent last week. While Copper, Lead and Zinc settled higher with gains of more than five percent. Nickel was the highest gainer with gain of approximately eight percent.
Fund buying was seen in all industrial metals across the board.
USD was trading weak against Euro and other major currencies in the last week which makes dollar denominated commodities cheaper for buyers of other currencies.
Euro became strong against US dollar as expected 25 basis point rate hike by ECB (European Central Bank).
Moreover, the greenback was under pressure on government shutdown news also because of dispute between Democrats and Republicans on cutting budget deficit.
Base metal prices have risen also because of expected reconstruction demand from Japan after earth quake and Tsunami last month. Prices went up on hope of global economic optimism indicates that metals demand from China, the major metal consumer will continue to rise. So if circumstances change then market may witness heavy sell off in base metal complex.
Copper inventories at LME went up by 1.2 percent in the last week ended on 08th April, 2011. Inventories levels of Lead and Nickel at LME fell by 1.4 and 2.2 percent respectively. While Aluminium stocks at LME fell by 0.22 percent for the last week. Inventories from LME witnessed decline last week was because of investment demand of metals.
Better than expected jobless claims data from US also played a good role in sending base metal prices northward.
However, according to some analysts, the current rally in base metals is not sustainable and metals are vulnerable for profit booking because of geopolitical concern in Middle East and Euro-zone sovereign debt issues.
Aluminium and Lead traded near three years high while Copper last traded at $ 9875 per tonner moving to its all time high near $ 10150 per tonne touched couple of months back. While 3 Months Lead and Nickel on LME last traded at USD 2850 per tonne and USD 27600 per tonne respectively. At LME, 3 Month Aluminium last traded at 2713 USD a tonne. Zinc 3 Month LME contract last traded at 2532 USD per tonne.
More monetary tightening from China to tame inflation may also reduce investment demand of industrial metals expecially Copper. Another headwind for base metals is high Crude prices which last traded near 113USD per barrel which is at 30 months high.
Metal prices are likely to find its direction from global stock markets and currency movements in the short term. Traders are waiting for series of economic data from US in next week like Federal Budget Balance, Retail Sales, Business Inventories, PPI, Unemployment Claims and Industrial Production.
Source: http://www.commodityonline.com/news/If-you-see-a-Gold-correction-grab-the-opportunity-38056-3-1.html
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