Commodity Trends:Comexes to bring more volumes

Indian commodity exchanges clocked a volume of over Rs 50,00,000 crore ($1.02 trillion) in 2008 within a span of six years after futures trading was reintroduced in 2003. The total turnover of three national and 19 regional exchanges rose by 28% at Rs 50,33,857 crore in last calendar year, as against Rs 39,32,403 crore in 2007, according to Forward Markets Commission (FMC) while the largest bourse Multi Commodity Exchange has launched futures trading in electricity for the first time in India .
The annual Wholesale Price Index-based inflation rose 5.91 per cent during the week ended December 27, slower than the previous week’s annual rise of 6.38 per cent, with the year-on-year inflation rate marking a decline across all the major commodity groups.

Many commodities including rubber, guar, cotton, crude oil are all affected in some way or the other due to weak global demand.

Crude Oil
Crude Oil prices rose to $50 per barrel in the last week, on concern that supplies from the Middle East may be disrupted amid a conflict between Israel and Hamas in the Gaza Strip. With Russia also decided to stop natural gas supply to European nations because of the conflict with Ukraine, oil prices got additional support as this incident created short term supply concerns in Europe. This rally was short lived and prices tumbled more than 12% on Wednesday, in the wake of sharp rise in crude oil inventory. A temporary truce in Gaza strip between Israel and Hamas also helped to ease rising geopolitical tensions in Middle East. With most of the world suffering from recession, demand for oil is expected to remain subdued. Sharp rise in crude oil, gasoline and distillates have brought bears back from hibernation.

Crude Oil inventory at Cushing Oklahoma is at record high level, which limits additional buying capacity of oil companies. With Russia expected to begin natural gas supply to European nations, concerns over short term energy supply disruption have eased. Oil prices can remain susceptible to the news from Gaza in the near term. In the short term, Crude Oil prices are likely to face resistance around $48 levels and on the downside good support is seen at $35. On MCX, the resistance is at 2250 whereas support is seen at 1700.

Gold
Rally in gold prices was stalled in the last week, as gold prices fell on account of relatively strong dollar against euro, late fall in crude oil and profit booking by traders. Spot gold touched a high of $885/oz before tumbling back to $850/oz range. Physical demand for gold came down after recent rally in gold. Gold imports by India, the world’s biggest buyer, fell to about 3 metric tons from 16 tons a year earlier, for a second straight month in December, according to the Bombay Bullion Association Ltd. Bullion price movements continue to be primarily driven by concerns with regard to the US Economy, which in turning is being reflected in the Dollar movements.

Downside in gold was limited, as weak US manufacturing, consumer spending and job data raised concern over economy and raised demand of gold as safe heaven asset. During this week, traders will have to keep close eye on European Central Bank (ECB) decision’s on interest rates. As per market expectations, they are likely to reduce interest rate as Euro-zone economy is also witnessing drop in inflation and decline in consumer spending. Silver prices followed suit, and traded lower. Silver being an industrial metal, it has been greatly impacted by the slowdown in global economic growth and falling base metals prices. Spot Gold continues to meet with resistance around $880 - $885 levels. ONLY a close above this level and sustained trading above the same will lead Spot Gold towards the $920 mark.