On the MCX, gold was up by more than 4%, crude oil hovered near $80 on the NYMEX but later in the week was hammered down due to surging US unemployment rate and closed in red at $77.43 (December delivery contract).
MCX crude oil was down by 0.22% and copper was low by more than half a per cent. On the macro front, the data was again mixed-signalling a slow recovery ahead.
The US October employment report indicated that the labour market is still a major concern in the path of economic recovery. The US unemployment rate rose to 10.2%, the highest since early-1983, and jobs fell 190k, which was near to the Reuters survey of 170k.
One positive indication from the report is that employment is falling more slowly than earlier this year. The Federal Open Market Committee, along with the European Central Bank and Bank of England, left its interest rates unchanged. The Federal Reserve stated that the economy is improving and that the activity in the housing sector has increased over recent months.
Gold continued its rally last week testing an all-time high of $1101.90 an ounce on COMEX Division of New York Mercantile Exchange. On the MCX, it made a high of Rs16688. It is the inflationary concerns which has triggered buying in precious metals. especially gold. as investors are seeking safe haven due to uncertain financial markets. The fall in dollar (ICE Dollar Index was down by 0.75% on a weekly basis) also supported gold to reach its all time highs.
We expect that gold can trade still higher and can test our next target of $1135 an ounce on the COMEX division of New York Mercantile Exchange.
Technically, the gold market is trading in overbought zone, so we can expect some correction. But the correction will be short-lived and investors can accumulate gold in dips towards $1077. Strong support is pegged at $1061 break of which on closing basis can take the prices down till $1030 levels. Weekly resistance is at $1111 and above there at $1026.
Crude oil future continued its range move and hovered near $80 for most the week. The US employment report released on Friday pressurised crude prices due to demand concerns.
As per our expectations, crude oil is not sustaining at higher levels and is failing to breach $82 levels on NYMEX as the real fundamentals of supply & demand still remain bleak. Crude oil prices were further pressurised as Opec members stated that they were not comfortable with oil prices nearing $100. At lower levels, oil prices got support from a rise in US retail gasoline demand in last week from a same period year earlier, according to Master Card spending pulse report on Tuesday.
The weekly inventory reports from API and EIA have been acting as a cushion to falling oil prices from past many weeks. A report on demand forecast from major oil forecasters will be firmly awaited by the market traders this week for a clear direction. On charts crude oil has broken the major support levels and is headed towards $74-73 levels.
We expect that crude can give a bounce back till $78.50 but will not sustain and will ultimately fall to $74-73 levels. Strong resistance now is at $80 levels breach of which can take the prices again to $82 levels.
On the base metals front, copper too moved in a narrow range on back of mixed economic data and on concerns of weak demand. Investors kept a close eye on what the central banks had to say about economic growth and the future direction of benchmark interest rates, but were unable to take any clear direction due to flat outcome of major central banks meet.
On demand front, imports from China, in the coming week is expected to drop after an unexpected strong inflow in the month of September. Imports of refined copper in the month of September surged 29% to 282,828 tons, much higher than the anticipation of 200,000 tons.
In the month of october we might see a drop in imports of unwrought and semi finished copper. The stockpile of copper in the LME warehouse is rising since mid-July and has climbed to a six weeks high to 379825 tons. For the week we expect copper will trade with a negative bias.
?(The author is head of commodities, Motilal Oswal Financial Services Ltd)