Provided by CPM Group, Vol. I, No. 18, 25 Oct 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 |
Commodities prices in general have continued to show strength. This trend has been particularly evident in the prices of gold, silver, and petroleum, covered in these reports. Prices may be expected to continue to strengthen, although from a short-term perspective each of these three major traded commodities may be over-due for a short-term downward correction due to profit-taking. Prices have risen to high levels and remained high for several weeks now. Technically driven investors and traders are viewing these markets as over-bought and due for a dip in prices. Investors meanwhile have ignored these trends and continued to buy into gold, silver, and petroleum, along with other commodities. Fabrication and consumption demand also has been relatively strong. These trends may keep prices high this week and beyond. While these commodities could see prices dip somewhat this week on profit-taking, there remains strong fundamental demand from investors, traders, and industrial users which should be expected to limit any drop in prices. Bargain hunting would be expected to come into the markets as soon as prices dropped below technical targets. By the middle of November fundamental demand for gold and silver should be more supportive. |
The dollar has continued to lose value against the euro, while rising against the pound sterling and yen. The decline in the dollar has been relatively modestly paced in recent weeks, suggesting that there is not a great deal of panic selling based on short– or long-term negative views toward the dollar. Rather, the dollar has been slipping against the euro as investors globally have become ever more convinced that the recession is moving toward its end, to be replaced by economic recovery. In this environment, investors are moving away from U.S. Treasury securities and U.S. government backed bank CDs toward a broader array of investments. Some investors are moving toward higher yielding bonds, while others are converting dollars to euros and other currencies in order to re-deploy long-sidelined assets in Europe and elsewhere. The British pound and yen have been weak reflecting more pessimistic views of the economic prospects of those countries. The dollar may continue to slip against the euro this week. The dollar carry trade definitely has been a negative for the dollar. The absence of U.S. government action to encourage banks to increase corporate lending also has sent a negative message to the market.
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DGCX Prices & Daily Volumes |
Market
(as at Oct 23, 2009) |
Current Week close |
% Change |
Change |
Weekly High |
Weekly Low |
Gold ($/ounce) |
$ 1056.00
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0.18
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▲ |
$ 1068.60
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$ 1048.50
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Silver ($/ounce) |
$ 17.630 |
1.15 |
▲ |
$ 17.950 |
$ 17.340 |
Euro ($/Euro) |
$ 1.500 |
0.73 |
▲ |
$ 1.505 |
$ 1.488 |
GBP ($/GBP) |
$ 1.630 |
-0.31 |
▼ |
$ 1.663 |
$ 1.624 |
INR ($/100 INR) |
$ 2.144 |
-0.53 |
▼ |
$ 2.175 |
$ 2.137 |
JPY ($/100 Yen) |
$ 1.086 |
-1.30 |
▼ |
$ 1.110 |
$ 1.086 |
WTI ($/b) |
$ 80.50 |
2.51 |
▲ |
$ 81.92 |
$ 77.64 |
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ADV (6,812)
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Economic Indicators
Indicator |
Change |
Value |
Change |
% Change |
CRB Index |
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280.34
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4.24
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1.5%
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U.S. Dollar Index |
▼ |
75.45 |
-0.15 |
-0.2% |
T-Bills
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▼ |
0.05%
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-0.01% |
0.0% |
DJIA |
▼ |
9,972
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-23.73 |
-0.2% |
FTSE Global All-Cap
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▼ |
327.11 |
-0.89 |
-0.3% |
Source: Bloomberg Data |
COMMODITIES |
Crude Oil |
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Oil prices have been rising, apparently on a combination of short liquidation and fresh long investment buying. Investors continue to be attracted to petroleum for several reasons: as a currency hedge, out of inflation concerns, and with the expectation of stronger demand for oil as economies revive. Non-commercial market participants have been building long positions over the past several weeks, while the recent surge has encouraged producers to lock-in current price levels. Current supply and consumption trends meanwhile suggest a less optimistic price outlook, but the oil market is looking beyond current conditions. In this environment, investors could continue to build additional long positions in crude, while others may continue to unload short positions. Oil may remain near $80 this week but $75 still beckons. |
Gold |
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Gold may move between $1,050 - $1,070 this week, but prices are expected to remain in an upward trend. Strong support for prices remains at $1,040, although $1,050 is emerging as a base. Investment demand for gold remains firm while the U.S. dollar has been weakening against other major currencies. The possibility that prices head toward $1,080 remains high. Demand for gold in India has held up despite high gold prices, but is off from last year’s levels. The wedding season in India begins next month and there could be another uptick in demand as was seen during Dhanteras and Diwali. Recent reports suggested that the Russian central bank may sell between 643,000 ounces and 1.3 million ounces to help cover its budget deficit. This report has yet to be officially confirmed, however, and there was market skepticism over what the bank actually may do. Over the past several years the Russian central bank has been adding gold to its reserves. During the first eight months of this year it added 1.9 million ounces, bringing holdings to 18.6 million ounces. |
Silver |
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Silver prices could possibly test $18.00 — $18.25 before retreating toward $17.25 later this week. Prices have held above $17.00 over the past several weeks, which has helped create a higher base. Bargain buyers have been eagerly waiting for dips below $17.00 to increase their purchases, but that has not been happening. The festival season in India is over, which could take some support away from prices this week. Also, profit-taking and technically based selling could emerge at such high levels. The appreciation of the Indian rupee against the U.S. dollar kept demand for silver strong during the festive season. Demand for silver jewelry and silverware in India is likely to pick up more forcefully once again as the wedding season approaches. The marriage season in India officially runs from November until the middle of December. Investors have been consistently adding to their ETF silver holdings since the beginning of the year. Combined ETF silver holdings stood at 423.0 million ounces at the end of last week, up 0.1% or 499,218 ounces from 422.5 million ounces on 16 October.
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CURRENCIES |
Euro / Dollar DEUR (US $ quoted in cents per Euro) |
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The euro may continue to strengthen against the dollar, possibly holding above $1.495 this week and moving to test $1.51. The euro rose to 14-month highs against the U.S. dollar late last week, reflecting investors’ continued shifting of assets into other currencies, in order to invest in non-U.S. assets. This is part of a broad redeployment of assets out of U.S. Treasuries into perceived riskier markets and investments. As part of this, investors are moving into other currencies' interest bearing securities with higher yielding returns. Technically oriented traders and short-term market participants meanwhile seem content to keep testing new lows for the U.S. dollar. Continued dollar carry trade selling also is contributing to the weakening of the dollar against the euro, even as the U.S. economy is showing signs of recovery and outpacing European prospects.
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Indian Rupee / Dollar DINR (US $ quoted in cents per 100 Indian Rupees) |
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The Indian rupee could continue to shed some of its recent gains this week and move toward 210 cents — 212 cents per 100 rupee. Last week the rupee was volatile, trending lower overall toward the end of the week. Profit-taking coupled with concerns about the sustainability of foreign capital inflows into the equity markets pushed the rupee lower. The Indian benchmark equity index, Sensex, fell 3.0% last week, settling at 16,810.81 points on 23 October. Foreign institutional investors bought around $495.3 million in Indian equity last week, down 39.7% from $821.0 million bought during the previous week. The rupee most likely will take cues from third quarter corporate earnings due to be released in the coming weeks. Stronger earnings reports may help stimulate more foreign investment demand for Indian equities, helping the rupee. |
Sterling Pound / Dollar DGBP (US $ quoted in cents per Pound) |
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The pound may move to test $1.60 later this week. Last week the pound had been rising and neared $1.67 before sharply selling off on Friday. Market perception was that the United Kingdom economy was recovering, but the third quarter gross domestic product figure came in much lower than expected. The United Kingdom economy contracted 5.2%. There has now been increased market chatter of a possible further expansion of the Bank of England’s (BOE) quantitative easing program and the possibility that it could lower interest rates at its next monetary policy meeting. Recent comments from BOE officials indicate that the Bank believes the worst of weak economic conditions may be over, however. In the meantime the pound may trend lower until this view is officially solidified in November’s monetary policy meeting. |
Japanese Yen / Dollar DJPY (US $ quoted in cents per 100 Yen) |
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This week the yen could continue to trade around 108 cents — 109 cents. The yen steadily moved lower last week, falling to as low as 108.65 cents on 23 October. The yen had been expected to correct over the past several weeks, but that did not actually happen. Higher yen against the U.S. dollar has been detrimental to Japanese exports. According to the Ministry of Finance, Japanese exports fell 30.7% during September when compared to last year. Market participants continued to reduce their net long positions, indicating a bearish sentiment toward the yen. The Bank of Japan in its minutes stated that it may not pump additional liquidity into the Japanese economy. This may be supportive of the yen, however, as it could help create more optimism toward Japanese real economic prospects on the part of investors.
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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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