![Weekly Logo](http://66.33.29.196/Images/FileManager/963.jpg)
Provided by CPM Group, Vol. 2, No. 16, 18 April 2010
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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 |
Late last week’s sharp decline in commodities prices may lead to increased buying interest this week. While a round of profit-taking had been expected to hit prices, especially if prices were not able to break above key resistance levels, prices sold off Friday for a reason that does not support such a downward move. Thus, prices may be expected to spring back this week, as investors reverse last Friday’s selling. Prices will have to hold above key support levels to attract investor fund, but that should not be a problem. Prices for gold, silver, and oil had been trending higher over the past several weeks, prior to the sell-off late last week. Last week’s bout of profit-taking also coincided with a strengthening U.S. dollar, further weighing on commodities. While buying interest may be sparked this week, the market remains vulnerable to another sell-off. Fundamentals continue to support prices for gold, silver, and oil. There has been increased optimism in financial markets related to the global economic outlook. An economic recovery is increasing demand for silver from fabricators while demand for oil is rising from consumers and industrial users.
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After a volatile ride last week, the U.S. dollar could begin to consolidate against the major currencies, including the euro, pound, and yen. Economic recovery is spreading around the world, but Europe and Japan are experiencing more difficulties than perhaps had been expected. The United States economy, on the other hand, has been recovering at a better and faster pace compared to the economies in Europe and Japan. Many investors have been moving monies out of Japan and Europe and reinvesting in U.S. dollar denominated assets. Leading macroeconomic indicators for the United States over the past several months have pointed to an economic expansion, although concerns remain. Consumer confidence, industrial production, economic growth measured as gross domestic product, and credit conditions have improved. Unemployment, however, remains high, capacity utilization remains low, and lending has been mixed. All of these are lagging factors, hwoever, so their weakness does not necessarily suggest weakness or absence of economic recovery. Meanwhile there has been increased speculation over a possible revaluation of the yuan. On Friday 16 April President Hu Jintao of China commented that the country would eventually adopt a floating exchange rate system. China may revalue the yuan, but the timing and revaluation methodology are not clear.
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DGCX Prices & Daily Volumes |
Market
(as at April 16, 2010) |
Current Week close |
% Change |
Change |
Weekly High |
Weekly Low |
Gold ($/ounce) |
$1136.90 |
-2.09% |
▼ |
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Silver ($/ounce) |
$17.720 |
-3.67% |
▼ |
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Euro ($/Euro) |
$1.351 |
0.13% |
▲ |
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GBP ($/GBP) |
$1.539 |
0.16% |
▲ |
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INR ($/100 INR) |
$2.243 |
-0.65% |
▼ |
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JPY ($/100 Yen) |
$1.086 |
1.15% |
▲ |
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WTI ($/b) |
$83.24 |
-1.98% |
▼ |
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ADV (4,551)
![Volume](http://www.dgcx.ae/Images/FileManager/1361.jpg) |
Economic Indicators
Indicator |
Change |
Value |
Change |
% Change |
CRB Index |
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2.5% |
U.S. Dollar Index |
▼ |
80.86 |
-0.24 |
-0.3% |
T-Bills
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- |
0.15% |
0.00% |
0.0% |
DJIA |
▲ |
11,018 |
40.81 |
0.4% |
FTSE Global All-Cap
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▼ |
206.47 |
-0.50 |
-0.2% |
Source: Bloomberg Data |
COMMODITIES |
Crude Oil |
![WTI](http://66.33.29.196/Images/FileManager/1350.jpg) |
WTI oil prices may fall slightly below $82 early this week after prices tested $83 on Friday 16 April. This dip could be seen as a buying opportunity by investors and prices could climb back toward $85 in the later part of the week. From 12 April through 16 April WTI oil traded at a discount of $0.57 compared to Dated Brent crude on a daily average basis. Brent crude has received more support from growth in global demand (ex. USA) than WTI prices as Brent is often considered a more accurate benchmark for global supply and demand fundamentals by market participants. Recent data from the International Energy Agency (IEA) showed that OECD industry stocks for oil and oil products represented 60.0 days of forward demand cover, 0.9 days below year-ago levels. Stocks are expected to build over the near-term as barrels previously held in floating storage come onshore. The IEA is forecasting 2010 global oil demand at 86.6 million bpd, up by 1.7 mbpd or 2.0% year-on-year.
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Gold |
![Gold](http://66.33.29.196/Images/FileManager/1351.jpg) |
Gold prices fell sharply late last week, but could recover this week. Gold prices had been rising overall since late March, but could not forcefully break above $1,160 - $1,170 last week. The lack of follow-through buying as technical resistance levels were tested and an easing of investor interest in gold helped cap price gains. Prices fell sharply on Friday 16 April. A strengthening U.S. dollar aided the decline. Investors may take this recent price dip as a buying opportunity, although there may be caution until prices firmly build a base, most likely above $1,120 or $1,130. A price decline below these levels could trigger another round of selling, and gold may head toward $1,100. That seems less likely than a rebound, however. While investment demand eased over the past week, the recent decline in gold prices could increase investor interest this week. Combined exchange traded fund (ETF) gold holdings were a record 57.34 million ounces as of 15 April, up 162,470 ounces from the end of the previous week. The prior week, ending 9 April, combined ETF gold holding had risen 326,137 ounces from the previous week.
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Silver |
![Silver](http://66.33.29.196/Images/FileManager/1352.jpg) |
Silver prices could trade between $17.25 and $18.50 this week, with a possibility of moving toward the higher end of the range as the week progresses. On the upside prices have a potential to spike toward $18.75 or even $19.00 for a brief time. Fundamentals indicating higher silver prices are still in place. As of 15 April there is 260.0 million ounces of open interest outstanding in the May silver contract traded in the New York Market. Shorts either will have to close their positions or roll into forward months, which could exert an upward pressure on silver prices in the next week or so. Furthermore, many investors have been holding large net long positions on expectations that silver prices could trend upward in the coming months. Despite some redemption in the ETF silver holdings, most investors continue to hold large amounts of silver as a safe haven or to gain from its price appreciation. Combined ETF silver holdings stood at 460.5 million ounces at the end of last week, down 1.5% from 467.4 million ounces on 9 April.
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CURRENCIES |
Euro / Dollar DEUR (US $ quoted in cents per Euro) |
![Euro](http://66.33.29.196/Images/FileManager/1353.jpg) |
The euro may trade around $1.35 this week, as the currency looks for direction. The euro surged early last week as eurozone members and the International Monetary Fund agreed to a financing package for Greece. While this package outlined several billion dollars of financial support and low borrowing costs, Grecian fiscal problems will not be quickly resolved. Yields on Greek fixed income assets remain high, still reflecting investor caution. Greek banks also are reported to be facing increased financial stresses. Financial and economic conditions are stabilizing and showing signs of improvement as a whole in the eurozone, but several member countries are facing economic hurdles that should be expected to weigh on the currency.
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Indian Rupee / Dollar DINR (US $ quoted in cents per 100 Indian Rupees) |
![INR](http://66.33.29.196/Images/FileManager/1354.jpg) |
This week the Indian rupee is likely to reverse its recent strength and head slightly lower. The rupee could possibly move toward 222 cents per 100 rupee. Profit-taking is likely to be encountered at levels around 225 cents, which could weigh on the rupee. That said, any decline in the rupee is expected to be limited. There has been tremendous growth in the Indian economy since late last year, which has resulted in large amounts of capital inflows into the country. Last week foreign institutional investors purchased $326 million in Indian equity, according to the Securities and Exchange Board of India. Higher return on investments has been one of the major factors in attracting ongoing capital inflows into India. The Indian government forecast the domestic economy to grow between 8.0% and 9.0% this year.
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Sterling Pound / Dollar DGBP (US $ quoted in cents per Pound) |
![GBP](http://66.33.29.196/Images/FileManager/1355.jpg) |
The pound could bounce between $1.52 and $1.55 this week. Concerns regarding the outcome of the 6 May election may exert a growing influence on the pound over the next several weeks. The ability of British parliament to produce effective fiscal policy reforms may hinge largely on a party’s ability to secure a definitive majority in the upcoming election. The pound may head lower if the election results do not provide a clear majority, which could reduce investor confidence in the United Kingdom’s ability to address its finances. That is several weeks away, however. Leading up to the election, the pound will be vulnerable to swings in pre-election polls. Although economic conditions have shown signs of stability and improvement over the past few weeks, the pound’s movement may be less reflective of these economic fundamentals this week. Economic data may need to diverge significantly from investor expectations to influence the pound, at least this week.
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Japanese Yen / Dollar DJPY (US $ quoted in cents per 100 Yen) |
![JPY](http://66.33.29.196/Images/FileManager/1356.jpg) |
The Japanese yen is expected to consolidate around 107 cents — 108 cents this week. Many Japanese investors have been moving away from the yen to invest in other higher yielding currencies and dollar denominated assets. This has been weighing on the yen. Japanese exports have improved from the low levels of last year, which has been supportive of the yen. Even though some sectors in Japan have shown signs of recovery, economic conditions in Japan remain weak. Consumer prices in Japan have continued to decline due to lack of demand from local consumers. Most buyers have been delaying their purchases on expectations that prices may decline further in the future. The Japanese government continues to lean toward an accommodative monetary policy. It may provide further liquidity to improve the domestic economy and boost consumer spending.
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Further Information
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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. |
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.
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