Following is the weekly commodity outlook from SMC Global Research:
Bullion counter on the domestic bourses is largely impacted by the movement of local currency rupee. The knee jerk reaction in the USD INR prompted selling pressure in gold as it strengthened by nearly 2.7% on expectation of resolution of FDI in retail bill in coming week. In near term rupee can strengthen further towards 54 levels and can cap the upside in bullions on domestic bourses. USD 1,705 proved to be strong support for gold in COMEX. Meanwhile the uncertainty about US fiscal cliff and euro zone debt concerns are keeping investor's skeptical about further movement. Gold (Feb) contract is expected to trade in range of 31,300-32,400 while silver (March) contract can trade in range of 62,500-66,000. Meanwhile gold silver ratio has dipped lower towards 50.3 from54 earlier. This ratio can further head lower towards 48 in near term. Hedge funds and money managers slightly raised their bullish bets on gold and silver futures on some safe haven bids in the week to Nov. 20.According to the World Gold Council (WGC) in its Gold Demand Trends for the third quarter of 2012 India regained its title as the strongest performing market, overtaking the greater China area, as the country experienced a bounce back in demand due to improved sentiment during the festival season. Compared to the third quarter of last year, Indian gold jewelry demand grew by 7% while gold bar and coin demand rose 12%.
Crude oil may remain in range as investors will keenly eye the euro zone situation coupled with solution regarding to fiscal cliff in US. Furthermore any escalation of Middle East tensions will spur the crude prices higher. There are expectations for a deal to be reached to avoid a US fiscal crisis, but investors wary about taking big positions before the end of the year were likely to take profits on the rises and buy on dips. Crude oil can trade in range of 4.700-4.950 in MCX and USD 84.5-90 in NYMEX. High oil stockpiles, slowing demand growth and a fragile world economy would usually give OPEC reason to consider supply cuts when it meets in December. Crude imports averaged 8.375 million bpd in September. Imports of crude oil have dropped year-over-year in eight of the first nine months of the year. In Middle East tensions, US has set a March deadline for Iran to start co-operating with UN nuclear agency investigations. Diplomacy between Iran and the powers the United States, China, Russia, France, Germany, and Britain - has been deadlocked since a June meeting that ended without success.US diplomat Robert Wood signaled Washington's growing frustration with the lack of results in the IAEA's inquiry into Tehran's nuclear program. Natural gas prices may tumble further lower towards 190 as the rise in the inventories and warm temperature in US will give bears upper hand in near term. Recently Energy Information Administration reported a 9 billion-cubic-foot decline in natural-gas supplies for the week ended Nov. 23.
In the base metals pack, aluminum and lead are likely to scale further higher due to supply tightness and rising premium in LME. Aluminum prices may move further higher and can test 118 in MCX. Banks such as JP Morgan and Goldman Sachs and commodities trade houses Glencore and Trafigura that own warehouses have built queues to take metal out, artificially restricting supply and underpinning prices. Rio Tinto Alcan has written to Japanese buyers seeking a premium of USD 240 per tone for January-March primary aluminium shipments, down nearly 6 percent from record premiums in the current quarter. Zinc and lead can further add to last week gains and can test 115 and 126 respectively. Nickel prices can trade in the range of 920-970 in MCX. Indonesia's nickel ore exports recovered in October, as biggest buyer China stocked up ahead of winter and more miners resumed production after meeting tough government rules that battered shipments this year from the world's top exporter of the metal. While red metal Copper may move in the range of 420-450. Chile's Codelco, the world's top copper producer, has reduced the premiums it will charge to ship metal to clients in China in 2013 by up to $12 a tone. Unionized workers at the world's No.1 copper mine, Chile's Escondida, have voted in favor of early labor talks with the mine's controller. China's factory activity in November probably expanded at its fastest pace in seven months; reinforcing views that recovery in the world's second-largest economy is entrenched going into the final quarter of the year.
Pepper futures (Dec) is likely to trade with a bearish bias owing to selling pressure before the onset of harvest by mid-December. Harvesting is expected to begin in December end in Kerala and arrivals will begin in second week of January. Chilli futures (Dec) is seen facing resistance near 5350 levels, capped by higher arrivals. In current scenario, harvesting is progressing in Madhya Pradesh & crop is remarkably good. In Karnataka, it is in advanced stage of development & in Tamil Nadu, transplanting is in progress. Turmeric futures (Dec) is expected to breach 4800 levels downside, being pressurized by higher arrivals & lack of export demand. This situation is adding to the situation of sufficient supplies in the spot market following mounting stocks. Jeera futures (Dec) will probably trade in the negative zone & remain below 14,700 levels, due to anticipation of higher carry-over stocks. It is estimated that total carryover stocks is at 6 - 7 lakh bags during the current year compared with 5 - 6 lakh bags last year. Moreover, market participants are keeping away from fresh buying as they are closely watching the ongoing sowing progress in Gujarat. Cardamom futures (Dec) might remain range bound within 950-1,080 levels. After the recent surge in prices, exporters are hesitant to buy, as the average price has crossed 800 a kg. As per data available with Spices Board India, the weighted average price as on Nov 29 has stood Rs 831.43/Kg.
Oil and Oil seeds:
The multi-week consolidation may continue in soybean futures (Dec) supported by steady export demand of soyameal. There are reports that Vietnam is likely to buy 50,000 tones of soymeal for December arrival and 100,000 tones for January shipment. Soybean prices are firm at spot markets of Madhya Pradesh and Maharashtra quoting at 2,950-3,400 per 100 kg. Plant prices of soybean are also steady at 3,250-3,325 per 100 kg in Madhya Pradesh and at 3,220-3,320 per 100 kg in Maharashtra. In days to come, the counter is expected to maintain support above 3,200 levels. On the international bourse, demand for U.S soybeans are increasing as China is stepping up export orders ahead of the peak consuming season during its Lunar New Year. Besides, there are also reports of planting delays in Argentina and Brazil as moderate to heavy storms is expected to be seen in days ahead. CPO futures (Dec) is likely to trade with a bearish bias & remain below 440 levels. The cold weather has lowered the demand for this commodity as it freezes at lower temperatures. Weak sentiments of higher stocks & rising production prevailing on the international markets may keep the upside capped. Mustard futures (Dec) is expected to trade with a positive bias owing to seasonal demand prevailing at the spot markets during winters. In the days to come, the counter may manage to remain above 4,100 levels.
Kapas future (Apr) is likely to consolidate within the range of 950-980 levels. Any large downside may remain capped supported by the fundamentals that production in Gujarat is likely to be 33% lower as compared to last year. The Domestic and Export Market Intelligence Cell (DEMIC) and Tamil Nadu Agricultural University (TNAU), Coimbatore revealed that the prices of cotton during November, 2012 to January, 2013 may remain in the range of Rs 800 to 940 per 20 kg. Chana futures (Dec) will possibly witness 4,100 levels downside due to lack of demand at spot markets & hopes of higher sowing. According to State Agri Departments, area under sowing of chana has increased by 22.82% in Andhra Pradesh, 10.81% in Rajasthan & by 29.12 % in Maharashtra. Sugar futures (Dec) will possibly consolidate in the range between 3,260-3,340 levels. At the spot market, the selling pressure has eased on reports that the Government has extended the deadline to December 10 for sales of the unsold 2 lakh tonnes from the October-November quota. Moreover, the crushing season is getting delayed owing to farmer's agitation for higher cane price. However, any upside may remain capped as stockiest are refraining from fresh buying, keeping in mind that there are ample supplies available in the market. Wheat futures (Dec) is likely to maintain its uptrend on taking support above 1,570 levels. In the recent development, Cabinet Committee on Economic Affairs has approved the continuation of the unrestricted exports.