Resumo de Bullions Safe Hedge

Jun 22 2006

Bullions: Safe hedge; gold up $10
A confluence of factors once again took gold out of its trading range of $535-$585. The falling dollar against the major currencies ahead of FOMC next week amid tensions in Iran and North Korea have been sending negative signals for the dollar. Further, firm oil prices yesterday kept the momentum alive in bullion.

Iranian President Mahmoud Ahmadinejad said that his country would reply by mid-August to the incentive package offered by the permanent members of the United Nations Security Council and Germany that aims to encourage Tehran to halt its uranium enrichment programme. However, it is believed that the USA has given a deadline of June 29 for Iran to respond. If there is a delay, the tensions could escalate, which is likely to support the bullions.

Further, the dollar fell to a one-week low against the euro after the director of the European Central Bank indicated that interest rates in the euro zone might increase again. Today's jobless claims and leading indicators forecast numbers are likely to support the prices of bullion. For more insights, refer to the Commodity Insight released on June 19, 2006.
Copper: Sell on rise
Short covering on the Comex lifted the prices of copper. The markets have been moving on very low volumes. The low inventory at the LME and the expected strikes in Chile have been supporting the counter. However, currently the markets are influenced more by the macro factors like interest rates rather than the micro factors like the supply disruptions. We still maintain that copper should be sold on rises.

Aluminium: Under pressure
The production of aluminium in the month of May was up by 1.80% year on year to 2.02 million tonne. The production is expected to increase further, as the power supply in China is likely to improve substantially. As a result the production loss at Alcan (due to lack of power), which is estimated to be around 1% of its total capacity, is unlikely to have a positive impact on the counter. Expect the counter to take a cue from copper. Sugar: Weakness to continue
The sugar counter looks weak as the demand is still low and the mills are out to sell in the market. Until there is some positive market moving news expect the weakness to persist in the counter.
Soybean: Medium term trend down
In the spot market soybean was steady due to lack of demand. The monsoon has picked up in certain parts of the country and is expected to gain strength in the coming days. The prices in the futures market have not been able to sustain at higher levels as the fundamentals point towards a downside.

Wheat: Very steady
The prices of wheat have been stagnating at the current levels, as there seems to be a perfect demand-supply situation. The situation in the spot market is also holding the prices steady in the futures market, and there seems to be no immediate reason for a downside. Crude oil: Likely to trade above $70
The gasoline inventory increased by 294,000 barrels as against the expectation of an increase of 1,500,000 barrels, which lifted the prices of crude oil. The gasoline demand is likely to increase during the Independence Day week (July 4, 2006) in the USA. As a result of the lower-than-expected increase in the stocks of gasoline, crude oil should remain firm.

The Snapshot

Commodity
Month

Closing price

%Cng

OI(000)

% Cng
View
Remarks

Gold
August
8,845
1.92
6,683
9.49
Positive
Weak dollar, geopolitical tension

Crude oil
July
3,239
1.57
243.6
1.92
Positive
Low gasoline stock

Copper
June
323.05
0.5
3,409
-18.13
Positive
Low inventory, supply disruptions, slow demand growth

Sugar
July
1,912
-1.09
31,610
-1.25
Weak
Lack of demand, selling pressure

Wheat
July
879.8
0.07
157,470
-1.38
Steady
Perfect demand-supply situation

Aluminium
June
112.95
-1.22
1,872
-0.74
Positive
Adequate production, to take a cue from other base etals

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