Provided by CPM Group, Vol. 2, No. 3, 17 Jan 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 and petroleum may move sideways in a volatile pattern over the coming week. There remains a great deal of investor interest in gold and silver, which could combine with short term congestion in the New York market later in January to pull prices higher. This coming week, however, these shorter term price pressures may be offset by investor caution and short-term selling by banks and traders. The U.S. dollar may show some renewed signs of strength, which could breed this caution on the part of investors and trigger the banks’ selling gold and silver. Prices may not fall far in the face of such mechanical selling, however, for several reasons. First and foremost: Investors will remain interested in buying gold and silver, especially on any price dips. Second, there may not be any strong commitment in favor of the dollar or against metals at this time. These would be weak trends to be long the dollar and lighten up on gold and silver long positions, based on short-term mechanical factors and not deeply rooted commitments. Oil prices could weaken slightly but are expected to hold up reasonably well. |
The dollar may exhibit some renewed upward strength against the euro and other major currencies in the coming week. U.S. economic conditions continue to show signs of improvement; they also are showing signs of outperforming European and Japanese economic prospects. As a result, there may be an emerging bias toward the dollar. It is a relatively weak impulse at this time, however, as investors and bank traders are reluctant to commit. Furthermore, the emerging global economic recovery may well be one characterized by investors seeking to diversify their portfolios further along geographic lines: Investors may have a bias toward U.S. equity and real estate investments over those in Europe and Japan, but it will be a matter of degree, and a desire to keep portfolios geographically balanced will limit any one-way trading. The dollar meanwhile may continue to suffer against the rupee and other emerging market currencies, reflecting the stronger economic conditions in these countries. Investors remain interested in emerging markets, which should see continued demand for their currencies as a result. Interest rates meanwhile are expected to remain low in North America and Europe in the near term. |
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DGCX Prices & Daily Volumes |
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ADV (7,107)
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Economic Indicators
Source: Bloomberg Data |
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| COMMODITIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Crude Oil | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Light, sweet crude oil prices succumbed to bearish sentiment last week as the cold snap in the United States let up, the U.S. dollar strengthened, and stockpiles of crude oil, distillates, and gasoline rose. Prices fell back below $79 as of the end of trading on 15 January. The public announcement on 14 January from the CFTC about its proposal to limit large positions in oil and other energy commodities also could have added to the selling pressure. Despite this downward momentum, the fundamental outlook for the crude oil market remains positive. U.S. industrial production rose for the sixth consecutive month in December while consumer confidence also increased. Restocking activities in the manufacturing sector, which are expected to begin in earnest over the next few months, could add a sustainable lift to distillate demand. Meanwhile, emerging market demand growth may continue to push prices higher, even in periods where investment demand turns sour. This week oil could trade between $76 and $81. |
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| Gold | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Gold prices could remain volatile this week, mostly moving between $1,120 and $1,180 this week. Prices may tend toward the low end early in the week but strengthen later in the week. Congestion in the February delivery period in the New York market could begin to pull gold prices higher as the week progresses. Strong support for gold prices is positioned at $1,100. Investment demand for gold remains firm, both from individuals and institutional investors. Demand for gold in the form of one-ounce bullion coins and bars continue to surge. Indian market demand weakened last week as gold prices rose, but the interest in buying remains and will be evident whenever prices dip. Investors have been pouring massive amounts of money into gold and other precious metals as a hedge against economic weakness, political instability, and inflation. Some long-term investors have been buying gold as a means of portfolio diversification. Bargain hunters have been waiting to take advantage of any decline in prices. Combined ETF Gold holdings were 56.1 million ounces at the end of last week, down slightly from 56.3 million ounces on 8 January |
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| Silver | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Silver prices could hover around $18.00 this week. There may be bouts of short-term profit-taking, but any decline in prices would be expected to be limited. Bargain buyers have been eagerly waiting for dips in prices to purchase silver. Seasonally, silver prices have risen in the first quarter of the year on healthy demand. Fabricators continue to foresee strong demand for silver-bearing products in the near future. As a result, they have been buying silver despite relatively high prices. There are several industrial uses of silver such as electronics, batteries, and solar panels where demand for silver already has been picking up since late last year. Ongoing concerns over financial markets, tepid economic conditions, and political strife could continue to keep investors interested in silver due to its safe haven and financial attributes. That said, there were some redemptions in iShares silver ETF at the end of last week. Combined ETF silver holdings were 461.5 million ounces as of 15 January, down 0.9% from 466.0 million ounces on 8 January. |
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CURRENCIES |
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| Euro / Dollar DEUR (US $ quoted in cents per Euro) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The euro could come under additional selling pressure this week. Greece’s deep fiscal problems continue to strain the performance of the euro, especially as investors question the strength of the ongoing economic recovery in the more resilient parts of Europe. The 10-year yield spread between Greek and benchmark German bonds stood at 283 basis points on 15 January, closing in on the March 2009 high of 300 basis points. Investors are concerned that Greece’s plan to chisel away at its budget deficit is not aggressive enough. In addition to Greece, other key euro area economies are coping with mounting debt problems. Over the next few trading sessions, the euro could move closer toward December’s low of $1.42 against the dollar. |
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| Indian Rupee / Dollar DINR (US $ quoted in cents per 100 Indian Rupees) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The Indian rupee could trade sideways this week, most likely moving between 215 cents and 220 cents per 100 rupee. The rupee was firm early last week, but gave up all of its gains as investors booked profits. Ongoing inflows of foreign funds tied to expectations of robust economic growth in India helped push the rupee sharply higher early in the week. Foreign institutional investors bought $965.5 million in Indian equity on a net basis between 11 January and 15 January. The Reserve Bank of India is scheduled to review its monetary policy on 29 January. Given that inflationary pressures have been mounting in India, many market participants expect that the government would hike interest rates sooner rather than later. |
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| Sterling Pound / Dollar DGBP (US $ quoted in cents per Pound) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The pound is expected to fall back to $1.615 - $1.620 this week. A public statement by a policy maker for the Bank of England, indicating that the quantitative easing program may soon need to be reversed, added to last week’s upward momentum. Like many economies, the UK is at a turning point and interest rates may soon need to rise. However, the recovery remains fragile with industrial production and GDP growth subdued. In the near term, speculation about changes in monetary policy coupled with continued economic weakness could continue to push and pull at the value of the pound. The central bank is in the process of buying 200 billion pounds of bonds while its benchmark rate remains at record low. |
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| Japanese Yen / Dollar DJPY (US $ quoted in cents per 100 Yen) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The Japanese yen could remain volatile this week, trading between 106 cents and 111 cents. There is no major economic data scheduled to be released this week. The yen strengthened last week as many investors fled to safe haven assets as a means of risk aversion. Despite signs of stabilization in some economies, many investors continue to remain skeptical toward the overall economic outlook. Weak economic data from some sectors continue to plague the Japanese economy. The Japanese government is likely to consider further quantitative easing measures to fight deflation and revive the domestic economy. A rising yen against the U.S. dollar is detrimental to Japanese exports. |
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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:
Dubai Gold & Commodities Exchange Weekly Views - January 17, 2010
Date 17/01/2010
