Welcome to the Weekly Market Views report from DGCX, providing you with a snapshot of what׳s happening in the energy, precious metal and currency futures markets.
Please note that the observations and views expressed in this newsletter do not reflect the views of DGCX and are solely the view of the writer (CPM Group).
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Commodities Overview |
Currencies Overview |
Gold, silver, and oil prices have risen sharply over the past several trading days. While prices came off a bit last Friday, gold remains at record highs, while silver and petroleum are at levels that are confounding some of the more bearish market participants. Other commodities have followed this trend, although not as sharply. This reflects the role of investors and commodities trading banks in the rise in commodities prices over the past several weeks: Gold, silver, and crude oil are the most traded commodities, and financially driven trades have a more pronounced influence in these markets. A weaker U.S. dollar, and concerns over currency market instability, is helping investors see commodities as attractive investments. This trend should continue. That said, prices may come off slightly this week on profit-taking, following sharp increases last week. If the price increases pause, banks covering of their shorts also will pause, and that would open the door for investors to take profits. If this occurs this coming week, prices could fall. The longer term trends fueling investor interest in all three commodities, and commodities in general, remain in place, however, so any drop in prices due to such profit-taking would be expected to be limited in time and depth. |
The dollar moved to new lows against most major currencies last week, as it continues to be pressured lower by short-term selling. Currency markets may remain unsettled near-term, as the IMF and World Bank meetings highlighted policy differences among countries, with no substantive agreements. Market participants expecting major central banks to intervene against the dollar will be disappointed. Major central banks have not forcefully engaged in currency market interventions since the early 1980s. Since then they do not try to reverse market trends, but rather try to amplify existing market trends. Interventions against the dollar should not be expected from Europe or North America. Japan may try one later, while central banks in smaller export-intense Asian economies already are trying to lower their currencies relative to the dollar. The current Administration favors a strong dollar, but that does not imply market intervention. The U.S. government seeks to strengthen the dollar over the long term, by engineering an economic recovery, trying to rectify past and current fiscal and monetary excesses over many years, and trying to remove long-standing impediments to stronger productivity growth. These are long-term policies and not short-term factors supporting the dollar. |
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DGCX Prices & Daily Volumes |
Market
(as at Oct 9, 2009) |
Current Week close |
% Change |
Change |
Weekly High |
Weekly Low |
Gold ($/ounce) |
$ 1051.40 |
4.82 |
▲ |
$ 1062.20 |
$ 1002.80 |
Silver ($/ounce) |
$ 17.730 |
9.48 |
▲ |
$ 17.930 |
$ 16.190 |
Euro ($/Euro) |
$ 1.471 |
0.85 |
▲ |
$ 1.481 |
$ 1.459 |
GBP ($/GBP) |
$ 1.583 |
-0.51 |
▼ |
$ 1.612 |
$ 1.582 |
INR ($/100 INR) |
$ 2.154 |
3.10 |
▲ |
$ 2.164 |
$ 2.097 |
JPY ($/100 Yen) |
$ 1.114 |
-0.15 |
▼ |
$ 1.134 |
$ 1.113 |
WTI ($/b) |
$ 71.77 |
2.60 |
▲ |
$ 72.45 |
$ 68.10 |
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ADV (4,010)
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Economic Indicators
Indicator |
Change |
Value |
Change |
% Change |
CRB Index |
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262.55
|
9.68 |
3.8% |
U.S. Dollar Index |
▼ |
76.40 |
-0.61 |
-0.8% |
T-Bills
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▼ |
0.07%
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-0.03% |
0.0% |
DJIA |
▲ |
9,865
|
377.27 |
4.0% |
FTSE Global All-Cap
|
▲ |
323.11 |
14.90 |
4.8% |
Source: Bloomberg Data |
COMMODITIES |
Crude Oil |
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WTI crude oil prices may fall back below $70 later this week. October is usually a seasonally weak month for crude oil demand in the Northern Hemisphere. The summer driving season has ended and colder temperatures typically do not place upward pressure on demand until November. There has been some support for crude oil prices from a weakening U.S. dollar over the past week, but prices have been capped by overall lackluster demand and higher production levels. Crude oil inventories in the United States remain above historical averages and may not decline significantly any time soon. In addition, the buildup in oil product inventories, reported by the EIA on 7 October, exceeded market expectations. High inventory levels across the complex will continue to cap any upward price moves, as investors focus on these short-term statistics. Prices have been moving between $65 and $76 since August, and may continue to do so over the next several weeks. Market sentiment about demand and supply prospects will have to shift toward a more positive tone for prices to break out of this range on the upside. |
Gold |
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Gold prices may trend lower this week, after reaching record levels last week. Prices would fall on profit-taking following the rise, coupled with a cessation of the delta hedge buying by bullion dealers that is believed to have been the major impetus for the spike in prices last week. Gold reached a record $1,056.30 on 8 October. Bullion dealers reportedly were hedging December calls they had sold in late 2009, with strike prices at $1,050, $1,100, and $1,200. While prices may back off this week, they are expected to remain strong and move higher later in 2009 and early 2010. Investment demand remains strong, fueled by a weakening U.S. dollar and other economic concerns. Combined ETF gold holdings reached a record 56.3 million ounces last week. There also was a surge in activity in futures and options markets. Concerns over the United States economy continue to weigh on the dollar. Demand for physical gold from investors has been firm, but demand for gold jewelry continues to decline. |
Silver |
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Silver may give up some of its recent strength in prices and head slightly lower this week. Prices could move toward $16.00 — $16.50. If prices break below this level, then a quick move toward $15.50 cannot be ruled out. This seems unlikely, however. Prices above $17.00 remain vulnerable to short-term selling and profit-taking. However, given the fervor with which investors and fabricators have been buying silver, any declines in prices are expected to be limited in duration, if not ferocity. Furthermore, investors may see any drop below $17.00 as buying opportunities. This could provide renewed support to prices. Investor concerns and anxieties over financial markets, economic conditions, and political developments remain at high levels. Silver has entered a period of seasonally strong demand. Consumers in India, the Middle East, and some of the other Asian nations already have increased their purchases of silver as festival and auspicious occasion’s approaches. Combined ETF silver holdings totaled 421.6 million ounces as of 9 October. Investors expect prices to rise higher this year and into next year, which will keep prices higher. |
CURRENCIES |
Euro / Dollar DEUR (US $ quoted in cents per Euro) |
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The U.S. dollar came under renewed downward pressure again last week as the euro rose from slightly below $1.46 to slightly above $1.48. The euro then came off on Friday, heading toward $1.47. Despite increased support for the U.S. dollar from central bank officials around the world and rising concerns about a high euro, the exchange rate of these currencies has not changed significantly over the past several weeks. The euro has remained above $1.45 since early September. Weak economic conditions continue in the United States and the eurozone. Economic indicators are mixed as to which economy is faring better. It may take a significant improvement in economic conditions in the United States for the dollar to recuperate and the euro to weaken. Until then the euro may strengthen further against the dollar. |
Indian Rupee / Dollar DINR (US $ quoted in cents per 100 Indian Rupees) |
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The Indian rupee could stop its recent rally and possibly move toward 210 cents — 212 cents per 100 rupee this week. Last week the rupee rose 3.1% against the U.S. dollar, settling around 215 cents by the end of the week. At such high level the rupee typically remains vulnerable to profit-taking and short-term technically based selling. Part of the strength in the rupee last week reflected a sharp sell-off of in the U.S. dollar by speculators in the non-deliverable forward markets. Part of the strength also reflected ongoing inflows of funds in the domestic equity markets by foreign institutional investors. Many market participants have been building up fresh long positions on expectations that the Reserve Bank of India could soon raise interest rates, which could further help strengthen the rupee later this year. |
Sterling Pound / Dollar DGBP (US $ quoted in cents per Pound) |
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The pound may continue to have a difficult time moving back above $1.60 this week. Last week the pound rose above this level on Thursday, but quickly fell after reaching slightly above $1.61. Mixed to slightly positive economic data for the United Kingdom provided initial support to the pound, but gave way after the Bank of England’s (BOE) monetary policy meeting. The BOE held its interest rate steady at 0.5% and stated that it still had 13 billion pounds left in its quantitative easing program. The BOE is expected to finish its asset purchase program by November, when it holds its next monetary policy meeting. Until then the pound may remain under downward pressure. Unemployment figures for the United Kingdom for September are scheduled to be released this week. If they are weaker than expected the pound may fall toward $1.56. |
Japanese Yen / Dollar DJPY (US $ quoted in cents per 100 Yen) |
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This week the Japanese yen could move sideways, trending lower overall. Support for the yen is positioned at 109 cents —110 cents. The yen had been expected to head lower over the past few weeks. But that did not actually happen. The Japanese government has been highly uncertain about its intervention in the currency markets. Japan’s finance minister previously stated that the government would not interfere in pushing the yen lower. This helped the yen move sharply higher. However, last week Japan’s Finance Minister once again changed his statements. The yen rose early last week, but then gave up most of its gains as the week progressed. Japan’s economy is highly dependent on its exports and a weaker yen could encourage higher exports, which could eventually lead to an economic recovery. |
Further Information
Full details on all of our products and DGCX news can be found at www.dgcx.ae. Alternatively, if you would like to speak with a Relationship Manager, please contact us.
Tel: +971 (0)4 361 1616 Email: info@dgcx.ae |
CPM Group is a leading independent commodities market research and consulting firm. CPM focuses on various commodities markets from precious metals to soft commodities. In its twenty three years as an independent company, CPM has consistently delivered unique, market-leading research and services to clients ranging from individual investors to leading international organizations worldwide. For more information and additional research please contact Adam Crown at +1 (212) 785 - 8324 or acrown@cpmgroup.com or visit www.cpmgroup.com. |
Disclaimers
Copyright CPM Group 2009. The views expressed within are solely those of CPM Group. Such information has not been verified by the DGCX, nor does DGCX make any representations as to its accuracy or completeness. Any statements non-factual in nature constitute only current opinions, which are subject to change. While every effort has been made to ensure that the accuracy of the material contained in the reports is correct, CPM Group or DGCX cannot be held liable for errors or omissions. CPM Group or DGCX are not soliciting any action based on it. Information contained here should not be relied on as specific investment or market timing advice. At times the principals and associates of CPM Group may have long or short positions in some of the markets mentioned here. This report is distributed weekly by DGCX to provide market participants with information and statistics related to specific commodities and currencies. CPM Group, a commodities consulting company, produces this report for DGCX. Visit www.cpmgroup.com for additional information.
DGCX refers to “Dubai Gold and Commodities Exchange” and any company which is an owned subsidiary of DGCX. No part of this publication may be redistributed or reproduced without written permission from DGCX.DGCX shall not be liable for the use of the information contained in this publication, connected with actual trading or otherwise. DGCX shall not be responsible for any errors or omissions contained in this publication. DGCX, nor its affiliates, associates, representatives, directors or employees, shall be responsible for any loss or damage that may arise to any person due to any action taken on the basis of this publication. This publication is for information only and does not constitute an offer, solicitation or recommendation to acquire or dispose of any investment or to engage in any other transaction. All information, descriptions, examples and calculations contained in this publication are for guidance purposes only and should not be treated as definitive. Those wishing either to trade futures and options contracts on DGCX, or to offer and sell them to others should establish their regulatory position before doing so. DGCX is regulated by the Emirates Securities and Commodities Authority (ESCA). |
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