Provided by CPM Group, Vol. 2, No. 22, 30 May 2010 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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).
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commodities Overview | Currencies Overview | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodities prices received a boost late last week amid a respite in investor concerns over financial markets and economic conditions. Euro zone sovereign debt problems remain, but the level of investor anxiety seen in previous weeks eased a bit. Relatively low commodities prices compared to previous weeks also attracted investor buying along with increased purchases from industrial users. It should not be expected that commodities prices rise in a linear fashion going forward, however. Just as investor sentiment turned less pessimistic last week, helping to reverse rapidly declining equity values around the world, it could just as easily reverse course. Governments seem to be addressing problematic issues in a quick fashion, but longer term structural problems remain. Europe’s governmental financial troubles have been the focus over the past couple of months, and are likely to keep investor sentiment on edge. Economic conditions meanwhile are likely to remain shaky, but be positive overall. Gold and silver should benefit, especially in the near-term, as investors will be reluctant to substantially reduce their safe haven assets in the current environment. Tenuous but overall positive economic activity should continue to support rising demand for oil. Already, seasonal demand patterns have helped provide a boost to oil prices along with resurfacing investor interest. |
Currency markets may begin to consolidate on a temporary basis in broad ranges this week. A resurgence in financial market volatility and investor fears, however, could quickly be sparked, pushing investors back toward safe haven currencies. Confidence in the euro remains lackluster, but the level of investor selling of the currency has eased. While the euro zone may be inclined to have a weaker currency so as to be more competitive in the global market place, it does not necessarily want to see the euro being devalued at such a rapid, strong pace. Investor sentiment toward the euro is likely to remain weak and the currency should be expected to face further selling pressure, but the decline could be extended over the next several months as opposed to what has been seen in May. As of 28 May the euro had fallen 7.7% month-to-date against the U.S. dollar, a much stronger decline than in previous months. A great deal of focus remains on European sovereign debt problems and on the steps that are being taken to address the financial ills that several euro zone member nations face. Governments are trying to temper investor unease, but financial conditions remain vulnerable. Credit conditions have slowly been tightening despite the liquidity programs recently undertaken by developed economy governments. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DGCX Prices & Daily Volumes |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
ADV (5,157)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Economic Indicators
Source: Bloomberg Data |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| COMMODITIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Crude Oil | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
WTI oil prices could continue to orbit on either side of $75 as the upward momentum from the end of last week is maintained. Prices may find support above $70. Volatility will remain a prominent feature of the oil market. Fundamentally, there are no concerns about supply tightness at present, with ample spare capacity in OPEC countries and relatively high inventory levels worldwide. While fickle investor sentiment could push and pull at prices, oil is expected to perform well during June. Improving demand in the United States and investor interest in the energy complex may be enough to keep a firm floor under crude oil prices. Industrial activity has been strong and consumer demand for gasoline is entering a seasonally strong period during the summer months. Implied demand for distillates in the United States was 4.02 million barrels per day for the week ending 21 May, according to the U.S. Department of Energy. This was up more than 10% year-on-year. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gold | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
Gold prices may move between $1,180 and $1,230 this week, although there still is potential for gold to head toward $1,250. Prices moved back above $1,200 last week as investment demand surged. Prices below this level drew buying interest. Combined exchange traded fund gold holdings were a record 62.85 million ounces as of 27 May, up 1.64 million ounces from the end of the previous week. This was the largest weekly increase since February 2009. Gold prices also were aided by the contract roll in the New York market. While investor concerns over European sovereign debt problems remain, the level of anxiety seems to have eased, which could allow for prices to ease a bit this week. As gold prices test resistance levels the degree of buying eases and profit-taking weighs on prices. The reduced volatility in financial markets in recent days has translated into less volatile gold price activity. Gold may begin to show signs of consolidation, but another wave of financial market instability could push prices sharply higher. A surge in political tensions also may provide a strong impetus for increased investment demand. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Silver | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
Silver prices are expected to consolidate this week, moving between $18 and $19. There is a possibility that silver prices decline toward $17.40, in the event of a broad market sell-off. Strong support has been seen for silver prices at this level. Healthy fabrication demand for the metal and safe haven buying by investors should prevent prices from slipping significantly below this level. Demand for electronics has been strong during the first quarter of 2010, according to Gartner. This is positive for silver fabrication demand as the metal is used extensively in the manufacture of semiconductors. Global mobile phone sales were up 17% and mobile personal computer sales were up 43% during the first quarter of 2010, over the same period last year. Gartner forecasts personal computer sales to grow 22% during 2010, over 2009. As of 27 May combined exchange traded fund holdings were unchanged from the end of the previous week. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CURRENCIES |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Euro / Dollar DEUR (US $ quoted in cents per Euro) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
The euro is likely to test support levels again this week, possibly edging toward $1.20. After several weeks of strong declines the euro managed to hold above $1.21 last week. A relatively weak euro attracted bargain hunters, although the currency was capped at $1.25. Confidence in the euro remained weak, but was tempered by recovering equity markets. Euro zone members facing sovereign debt and fiscal problems moved forward on austerity measures, providing a boost to investor sentiment. Speculation over possible sales of euro zone bonds by China’s State Administration of Foreign Exchange (SAFE) increased currency volatility, but was later quelled as the SAFE reported that these rumors were false. Longer term, weak investor sentiment toward the euro may continue and eventually push the currency lower. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Indian Rupee / Dollar DINR (US $ quoted in cents per 100 Indian Rupees) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
The rupee may try to move firmly above 216 cents per 100 rupee this week. This may depend largely on investor sentiment toward Europe’s sovereign debt problems, but also on investor sentiment toward developing markets. The rupee declined for most of last week before recovering sharply on Friday 28 May. The currency had fallen toward 209 cents, but bargain hunting and a rallying stock market by week’s end provided the impetus for an increase in investor buying. The rupee surged to trade slightly above 215 cents before easing. The Sensex gained 2.5% last week, but surged 5.7% from an intraday low of 15,960 touched on 25 May. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sterling Pound / Dollar DGBP (US $ quoted in cents per Pound) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
The pound may move to trade above $1.46 this week. The pound began to recover last week after falling to levels not seen since early 2009. Investor concerns regarding euro zone sovereign debt problems have helped weigh on the pound since the United Kingdom also faces fiscal issues that it must address. The degree of financial troubles facing the United Kingdom are less severe than those of some euro zone members, however. Near-term government funding is less problematic. Political friction also is not as strenuous as in the euro zone. The coalition government in the United Kingdom is expected to find it less difficult to address the country’s fiscal imbalances than what is currently being seen in the euro zone. In the interim, however, the pound may not be able to move above $1.50. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Japanese Yen / Dollar DJPY (US $ quoted in cents per 100 Yen) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
The yen may trade around 110 cents this week. The yen rallied toward 112 cents early last week, buoyed by sharp declines in equity markets and a weakening euro amid rising concerns that sovereign debt problems in Europe would stunt global economic activity. Investors are likely to keep the yen supported until there is firmer confirmation that euro zone debt problems will not deteriorate much further. That said, investors also will look for buying opportunities abroad, which may help limit the yen’s upside. Economic conditions in Japan remain fragile, but are receiving support from a surge in exports. April's unemployment rate increased to 5.1%, up 0.1% from the previous month, while household spending fell 0.7% year-on-year. Exports meanwhile surged 40.4% in April compared to the same period last year. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Further Information |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reference herein to “DGCX” shall mean the Dubai Gold & Commodities Exchange DMCC. 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. Neither 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. DGCX shall not be responsible for any errors or omissions contained in this publication. All information, descriptions, examples and calculations contained in this publication are for guidance purposes only and should not be treated as definitive. No part of this publication may be redistributed or reproduced without written permission from DGCX. 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). ESCA is a member of the International Organisation of Securities Commissions (IOSCO). |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FTSE Mondo Visione Exchanges Index:
Dubai Gold & Commodities Exchange Weekly Market Views - May 30, 2010
Date 30/05/2010
