Provided by CPM Group, Vol. I, No. 21, 15 Nov 2009
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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 |
Commodity prices could be choppy this week. Gold and silver prices could be strong, while crude oil could bounce sharply in both directions. Gold and silver had been expected to experience some price weakness in early November, but then to rise later in the month. The increase in late November was expected to reflect tight market conditions, including the need of shorts to roll large volumes of December futures positions into forward months in advance of the December delivery period. The weakness that was thought to possibly precede this meanwhile has yet to appear, seemingly over-ridden by strong investment demand fueled by currency market volatility and broader economic concerns. While a round of short-term profit-taking and short selling could hit gold and silver this week, such an event becomes less likely with time. Last week bargain-hunting and short covering appeared as soon as gold failed to pierce $1,100 on one day. Given the widespread bullish opinions toward gold and silver, prices may not back off yet in November, and could move sideways to higher this week. Oil prices may test $75, meanwhile, although the potential for a spike above $80 on a short-term basis should not be ruled out yet this month. |
The currency markets may be preparing to enter into a new period in which the dollar’s fate relative to various currencies diverges even more, making it even more difficult to forecast currency exchange rate trends. This coming week the dollar may benefit from some good-will toward the United States economy during President Obama’s Asian tour. While his visits to Japan and China may provide short-term support for the dollar, longer term it appears that the Chinese government is moving toward a significant revaluation of the yuan against the dollar. While this would be negative for the dollar’s exchange rate against the yuan, it actually could serve as a benefit for the dollar against the euro and other currencies. This could happen if a revaluation of the dollar-yuan exchange rate were interpreted by the currency markets and broader financial community as representing a significant positive development for longer term economic growth and stability across major economies. While it might seem counter-intuitive that a weaker dollar against the yuan could strengthen the dollar against the euro, yen, and pound, such a divergence in exchange rate trends is possible, and could begin to emerge over the next few weeks.
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DGCX Prices & Daily Volumes |
Market
(as at Nov 13, 2009) |
Current Week close |
% Change |
Change |
Weekly High |
Weekly Low |
Gold ($/ounce) |
$ 1,108.6 |
1.27% |
▲ |
1,123.2 |
1,097.30 |
Silver ($/ounce) |
$ 17.33 |
-0.12% |
▼ |
17.765 |
17.200 |
Euro ($/Euro) |
$1.486 |
0.18% |
▲ |
1.504 |
1.485 |
GBP ($/GBP) |
$ 1.658 |
-0.16% |
▼ |
1.683 |
1.651 |
INR ($/100 INR) |
$2.136 |
0.33% |
▲ |
2.158 |
2.133 |
JPY ($/100 Yen) |
$ 1.1061 |
-0.66% |
▼ |
1.119 |
1.104 |
WTI ($/b) |
$ 76.94 |
-0.63% |
▼ |
80.48 |
76.60 |
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ADV (8,777)
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Economic Indicators
Indicator |
Change |
Value |
Change |
% Change |
CRB Index |
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269.12 |
-0.32 |
-0.1% |
U.S. Dollar Index |
▼ |
75.29 |
-0.53 |
-0.7% |
T-Bills
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▲ |
0.06% |
0.01% |
0.0% |
DJIA |
▲ |
10,270 |
247.05 |
2.5% |
FTSE Global All-Cap
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▲ |
328.84 |
8.92 |
2.8% |
Source: Bloomberg Data |
COMMODITIES |
Crude Oil |
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WTI oil prices weakened considerably on Thursday and Friday after a softening dollar propped up prices at the beginning of the week. Oil traded below $76 during intraday trading on Friday 13 November. This bearish sentiment could continue this week and prices may stay contained in the $75 - $78 range. In October global oil supply rose by 635 kb/d to 85.6 mb/d according to the latest International Energy Agency (IEA) report. OPEC production reached 29.0 mb/d, the highest level since January 2009. Moreover, the intergovernmental body revised its 2009 global oil demand forecast higher by 210 kb/d to 84.8 mb/d on expectations of a rather strong rebound in year-on-year growth in the fourth quarter. Meanwhile, OPEC, which generally maintains more conservative projections, is forecasting 84.3 mb/d of global oil demand for 2009, more than 500 kb/d lower than the IEA.
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Gold |
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Gold prices continued to extend its reach into record territory last week, nearing $1,125 at one point. This week prices are expected to rally once more and retest if not surpass the highs last week. The level at which investors are willing to buy gold continues to increase. As of 11 November combined ETF gold holding were 56.27 million ounces, up from 55.95 million ounces at the start of the month. As investment demand remains strong, demand for gold jewelry has become increasingly weak. High gold prices are deterring discretionary spending for gold jewelry amid weak economic conditions in developed economies. In India gold prices above $1,100 have stunted demand despite the wedding season underway, a typically strong period for gold jewelry demand. Gold prices remain supported by a weak U.S. dollar and delta hedging of call options by banks. The contract roll of gold futures is beginning to occur and is expected to increasingly support gold prices over the next few weeks. |
Silver |
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Silver prices are forecast to remain strong this week, most likely moving between $17.00 and $18.25. If prices manage to break above $18.25, which is a near-term resistance level being watched by many market participants, silver could spike to $18.75 or $19.00. However, the increase in prices would be expected to be short-lived, as shorter term investors may take profits. Silver traded in a narrow range last week, mostly hovering around $17.00. Industrial users and bargain hunters continue to take advantage of even small dips in prices. This has been minimizing any declines in silver prices over the past several weeks. Demand for silver in the form of jewelry and small size coins has been holding up fairly well in India, the Middle East, Pakistan, and several other Asian nations. Both long-term and short-term investors continue to purchase silver. Combined ETF silver holdings stood at 428.2 million ounces at the end of last week, up slightly from 428.0 million ounces on 6 November.
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CURRENCIES |
Euro / Dollar DEUR (US $ quoted in cents per Euro) |
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The euro may try to retest last week’s highs but most likely will not be able to move forcefully above $1.50, as has been the case over the past month. The U.S. dollar continues to experience weakness against almost all currencies, but has been able to hold up against the euro over the past month. The euro between $1.47 and $1.50 appears to be a level that many market participants are seemingly satisfied with. There have been reports of profit-taking as the euro approaches $1.50. This may be the case this week as well. The euro may near this level before falling back toward $1.47 - $1.48. The U.S. Treasury has been talking up the dollar, but has not and will not take any direct market intervention actions in favour of the dollar. The dollar may benefit from President Obama’s visits to Japan and China this week. |
Indian Rupee / Dollar DINR (US $ quoted in cents per 100 Indian Rupees) |
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The Indian rupee could remain volatile this week, swinging between 211 cents and 215 cents per 100 rupee. Last week the rupee rose sharply early in the week but shed most of its gains by Thursday. A large part of the decline could be attributed to profit-taking and technically based trading by investors. The rupee, however, once again picked up on Friday 13 November, settling at 215.6 cents. Part of the gain in the rupee reflected selling of U.S. dollars by exporters and banks. There continues to be an on-going inflow of foreign capital into domestic Indian equity markets as investors have been pouring money into emerging market economies in search of higher returns. Foreign institutional investors bought $621.7 million worth of domestic stocks last week, up 307.7% from $152.5 million purchased during the week of 6 November.
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Sterling Pound / Dollar DGBP (US $ quoted in cents per Pound) |
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The pound is expected to head toward $1.62 this week. Early last week the pound reached $1.684 before declining toward $1.65. A 25 billion pound increase in the Bank of England’s (BOE) quantitative easing program lent support to the sterling, since the market had expected the asset purchase program would increase around 50 billion pounds. Last week BOE Governor Mervin King stated that an extension of the BOE’s asset purchase program was possible. Economic data for the United Kingdom has continued to be poor in recent weeks, while other industrialized economies have shown increased signs of stabilization. There is a growing sense that the BOE will tolerate a lower pound in the coming months to help increase economic activity.
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Japanese Yen / Dollar DJPY (US $ quoted in cents per 100 Yen) |
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The Japanese yen could head slightly lower this week, moving toward 109 cents — 110 cents. The yen has been trading in a narrow range over the past two weeks. Market perceptions that the Japanese government would not interfere in currency markets helped the yen rise sharply against the U.S. dollar. Japanese macroeconomic data still points out to weak economic conditions, however. Furthermore, appreciation of the yen against the U.S. dollar continues to hurt Japanese exports. Japan’s third quarter gross domestic product (GDP) figure is schedule for release this week, which many market participants expect to be around 0.7%. If the GDP figure is better than anticipated it could be supportive of the yen.
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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. |
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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