Provided by CPM Group, Vol. 2, No. 13, 28 March 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Precious metals have become a volatile battleground between shorter term investors exiting from long positions in response to a stronger dollar and improving economic conditions in many parts of the world on the one hand, and longer term investors who remain interested in these metals due to the fact that major trade, current account, savings, debt, and currency market imbalances remain unaddressed by governments. Liquidations by the shorter term investors have pushed prices lower, while the longer term investors have been heavy buyers in response to the lower prices. Precious metals may rise from last week’s low levels this week, perhaps into the ranges seen in the second week of March. Slightly longer term, gold and silver prices could fall back to make new short-term lows in the first half of April. Petroleum prices may follow a similar price pattern, albeit for different reasons. Demand for oil has been healthy, and is moving into a period of seasonal strength coupled with rising cyclical demand. Prices could show a great deal of volatility as investors exit these markets while longer term investors continue to add to their positions. |
The U.S. dollar had a good ride last week. The longer term impetus for the dollar to strengthen against other major traded currencies is more clearly defined. This week, however, there could be some short-term profit-taking, as investors and trading banks assess whether the dollar has moved too strongly too fast. Also, financial market opinions toward Europe and the euro could back off from some of the bleaker views that were so prevalent last week. In this environment, the dollar could fall this week. It is not likely to fall sharply, and any decline may be limited to a week or two. Longer term, the dollar still seems likely to strengthen against the euro, pound, yen, and Swiss franc, as the U.S. economy and markets present more promising short and long term prospects for investors than do Europe and Japan. The dollar meanwhile may weaken against the rupee, and the currencies of major countries running current account surpluses, as well as commodities exporting nations. |
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DGCX Prices & Daily Volumes |
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ADV (9,714)
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Economic Indicators
Source: Bloomberg Data |
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| COMMODITIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Crude Oil | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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WTI oil may trade between $79 and $83 this week. Oil market participants may continue to put movements in the U.S. dollar in the background and instead focus on the fundamental and macroeconomic outlook. This focus could lead to sideways trading caused by the counterbalancing forces of the looming seasonal demand push and mixed economic data. U.S. oil inventories rose to 351.3 million barrels from 344.0 barrels the week prior, according to 19 March EIA data. Meanwhile, motor gasoline inventories in the United States represented 25.1 days of consumption, down from 26.4 days on 19 February. However, once the refinery maintenance period ends, higher refinery runs could crowd a fragile market balance. The oil market could remain steady until there is more clarity on OECD demand growth. Industrial activity has continued to show signs of improvement. These improvements may eventually push prices above $85, but in the interim prices may lack a strong direction. |
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| Gold | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Gold may trade above $1,100 this week. A move to $1,140 or even higher is quite possible based on short-term short covering. There have been heavy volumes of buying and selling between $1,084 and $1,130 over the last two weeks, reflecting a battle between shorter term investors liquidating positions based on a stronger dollar and economic indicators and longer term investors taking price dips as opportunities to buy. Roughly half of the short-term shorts have rolled out of their April positions, taking advantage of the lower prices. Even so, a significant amount of open interest remains to be rolled this week. Combined exchange traded fund gold holdings were 56.67 million ounces as of 25 March, up 290,031 ounces from 56.38 million ounces on 19 March. A weaker dollar this week could provide added support for gold prices. Confidence in currencies has been lacking as investors have continued to be interested in gold. Prices remain vulnerable to further selling, however, and could decline back toward $1,080. |
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| Silver | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Silver may trade between $16.50 and $17.10 early this week, possibly moving into a higher range of $17.00 - $17.60 later this week. A cessation of short-term long liquidation and short selling, coupled with possible strength in gold prices and a slightly lower dollar could help move silver out of last week’s range into a range similar to that which prevailed two weeks earlier. Jewelry demand for silver in India, the Middle East, and other Asian nations has been holding up fairly well. Many buyers in India are taking advantage of dips in prices to purchase silver due to the upcoming marriage and festival seasons. Many investors remain interested in silver in light of persistent longer term economic risks, despite improving shorter term economic conditions. At the end of last week, combined ETF silver holdings were 469.7 million ounces, unchanged from the previous week. |
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CURRENCIES |
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| Euro / Dollar DEUR (US $ quoted in cents per Euro) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The euro may recover this week and could test $1.35. Last week the euro fell to a ten-month low as anxieties over Grecian debt problems resurfaced. Reluctance by some eurozone members to firmly back Greece’s finances helped push the euro toward $1.3279. Increased political friction among eurozone member governments weighed on the currency. In addition, Portugal’s sovereign credit rating was downgraded, adding further downward pressure on the euro. Late last week momentum was building for a concerted plan to back Greece’s finances as France, Germany, and the European Central Bank announced their support, although there is yet to be a detailed plan. The Federal Reserve meanwhile once again stated that it intended to continue with its accommodative monetary policies, removing some support from the U.S. dollar. |
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| Indian Rupee / Dollar DINR (US $ quoted in cents per 100 Indian Rupees) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The Indian rupee is likely to hold above 218 — 219 cents this week. There may be some weakness in the rupee due to month-end demand for U.S. dollar by many importers, but it is expected to be short-lived. Last week’s interest rate increase by the Reserve Bank of India was a positive sign, indicating better prospects for the Indian economy in the near future. Foreign institutional investors (FII’s) have continued to add liquidity into domestic equity markets. From the beginning of the year through 26 March FII’s have bought $11.4 billion in Indian equity on a net basis. This suggests that many foreign investors are optimistic that the current economic growth in India could be sustained, at least in the medium-term. |
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| Sterling Pound / Dollar DGBP (US $ quoted in cents per Pound) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The pound may move above $1.50 this week. The sterling fell to $1.48 on 25 March, which was the lowest level so far this year. Uncertainty over economic prospects in the United Kingdom has been hammering sterling down against the U.S dollar. Consumer price inflation in the United Kingdom stood at 3.0% in February, down from 3.5% in January. This was a positive indicator, as it could allow the Bank of England (BOE) to keep interest rates low for an extended period and in fact, if needed, provide further ability for the BOE to resume its other stimulus programs. There have been ongoing concerns over high unemployment and weak consumer spending. Government debt levels in the United Kingdom remain at uncomfortably high levels. These factors may cap the pound around $1.52, at least in the near term. |
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| Japanese Yen / Dollar DJPY (US $ quoted in cents per 100 Yen) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The yen may head toward 106 cents this week. The yen fell sharply late last week as Japanese investors increased their exposure to global financial markets. Higher yields in fixed income investments in Europe and the United States attracted fund flows. The Bank of Japan’s (BOJ) increased lending measures announced at its monetary policy meeting earlier this month also may be beginning to take hold. There has been rising concern that there may be increased carry trade activity. With weak economic activity and deflationary pressures continuing, however, the BOJ will likely maintain its loose monetary policy stance. On 25 March the consumer price index showed a decline of 1.9% year on year for January 2010. |
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Further Information |
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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. |
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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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FTSE Mondo Visione Exchanges Index: 98,667.21 +274.41
Dubai Gold & Commodities Exchange Weekly Market Views - March 28, 2010
Date 28/03/2010
