Provided by CPM Group, Vol. I, No. 27, 3 Jan 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 are expected to be strong during the first week of 2010. Investors remain bullish on commodities, including precious metals. Precious metals should do well in early 2010. If economic conditions appear more negative, gold and silver will continue to benefit from investors seeking alternative assets and hedges against continued weak equity and bond markets. If economic conditions are more positive, as CPM Group expects, investors will be interested in gold and silver as inflation hedges. Longer term investors meanwhile are expected to continue to buy precious metals as they seek to build greater long-term exposure to gold and silver in their portfolios. Either economic scenario thus appears to suggest investors will continue to buy precious metals in early 2010. Petroleum prices meanwhile seem most likely to show some renewed upward pressure, based on the views that economic growth will spread and accelerate, boosting demand for oil. Oil producers meanwhile are expected to show relative restraint in boosting production, and inventories may decline as supply holds stable while demand increases. Other commodities also would be expected to show price strength if economic expansion continues as projected in these reports.
|
Currency markets may be mixed in the coming week. While market observers often look for a clear directional signal at the beginning of the year, as the world returns from holidays, the signal for currency markets this year may be that the markets will be mixed. This reflects the likelihood that investors in 2010 may be most likely to be more active in deploying assets in numerous countries around the world. The U.S. economy and market may look more attractive than those of Europe, the United Kingdom and Japan. This could help the dollar strengthen against those currencies. The relative strength and attractiveness may be small and limited, however, so that the dollar advances may be smaller than some dollar bulls expect and frequently interrupted by profit-taking. The rupee and other currencies meanwhile may continue to be strong. Investors are likely to seek to diversify their holdings around the world, so that demand for currencies may be relatively balanced over the coming weeks and months. There does appear to be a medium term upward bias toward the dollar against the euro, yen and pound, which should provide a background to otherwise choppy currency exchange rates during the first few months of 2010.
|
|
|
DGCX Prices & Daily Volumes |
Market
(as at Dec 31, 2009) |
Current Week close |
% Change |
Change |
Weekly High |
Weekly Low |
Gold ($/ounce) |
$ 1096.40
|
-0.89%
|
▼ |
|
|
Silver ($/ounce) |
$16.960 |
-1.60% |
▼ |
|
|
Euro ($/Euro) |
$1.433 |
-0.18% |
▼ |
|
|
GBP ($/GBP) |
$1.616 |
1.41% |
▲ |
|
|
INR ($/100 INR) |
$2.140 |
-0.22% |
▼ |
|
|
JPY ($/100 Yen) |
$1.075 |
-1.58% |
▼ |
|
|
WTI ($/b) |
$79.36 |
1.68% |
▲ |
|
|
|
ADV (5,373)
Market closed on 1 Jan
|
Economic Indicators
Indicator |
Change |
Value |
Change |
% Change |
CRB Index |
|
|
|
0.9%
|
U.S. Dollar Index |
▲ |
77.90 |
0.16 |
0.2% |
T-Bills
|
- |
0.04% |
0.00% |
0.0% |
DJIA |
▲ |
10.549 |
28.41 |
0.3% |
FTSE Global All-Cap
|
▲ |
331.99 |
0.17 |
0.1% |
Source: Bloomberg Data |
COMMODITIES |
Crude Oil |
|
With cold temperatures in the United States adding credence to the early 2010 bullish demand scenario and the U.S. dollar moving lower, crude oil prices rose to a five-week high during the week of 28 December. Prices edged closer to $80 after trading below $75 as recently as 22 December. Such wide price swings can be expected at the end of the year where the holiday period results in light trading volumes. WTI oil prices could continue to move between $75 and $81 into the beginning of January. Crude oil inventories in the United States have been posting notable declines in line with the increase in refinery runs. Oil product stocks also have been declining, on rising demand for distillates. Prices are expected to break out of this range when market participants perceive the global economic recovery to be on firmer footing.
|
Gold |
|
Gold prices may move more firmly back above $1,100 this week, but could continue to consolidate around this level overall. Stronger investment demand is expected to revive in early 2010, moving prices higher. Over the past two weeks gold has traded in a narrow range mostly between $1,075 and $1,119. Slight shifts in investor sentiment amid lighter year-end trading volumes may have swayed prices more forcefully than they otherwise would have. Combined exchange traded fund gold holdings were 56.74 million ounces on 29 December, not far from the record 57.08 million ounces held in the middle of December. Increased movements in the U.S. dollar have been tugging at gold prices recently. Economic data slightly better than some market participants had expected has been supportive of the dollar and has helped weigh on gold. Any dips in gold prices as a result of such views have been met quickly with renewed investor buying, however. Gold price volatility may pick soon as investors begin to adjust their portfolios for the new year. It is likely that they will add gold to their portfolios, at least in the first few months of the year. |
Silver |
|
Silver may trade around $17.00 for most of this week, as investors return more forcefully to this market. Price dips below this level have been taken as buying opportunities over the past two weeks. This increased buying may have come more from fabricators than from investors. Combined exchange traded fund silver holdings have been little changed at 465.57 million ounces since 22 December. Reduced activity from investors during the last couple of weeks may have contributed to the relatively lower silver price volatility than in previous weeks. A price decline toward $16.00 – $16.25 may see increased buying, however, from both end-users and investors. On the upside, a price rally toward $18.00 also would be expected to spark buying from fabricators and investors. Fabricators may buy on concerns of having to purchase silver at higher prices later, while investors may buy in expectation of higher prices.
|
CURRENCIES |
Euro / Dollar DEUR (US $ quoted in cents per Euro) |
|
The euro may see some increased buying interest at current levels in this first week of the new year. The recent sharp gains in the U.S. dollar may be attributable to some efforts by institutions to purchase dollar assets for their books before year end. Some selling pressure may be removed from the euro early in 2010. The euro has fallen substantially in the last month, and it would be reasonable to expect some buyers to emerge at these relatively low levels. Major support for the euro would be expected at $1.41. Any further news on credit downgrades of eurozone members or weaker than expected economic data would be negative for the euro and could push the currency to test support levels. A run higher toward $1.45 is possible if strong bargain-hunting emerges, however.
|
Indian Rupee / Dollar DINR (US $ quoted in cents per 100 Indian Rupees) |
|
The rupee is expected to hold above 212 cents this week, and may even begin to move firmly above 215 cents. Strong positive sentiment continues to buoy the currency. A high level of foreign direct investment flows should be expected this year as well. The Sensex reached 19-month highs last week and many investors have retained a bullish sentiment heading into the new year. Despite increased talk among investors of already high valuations on Indian investments, many investors are still willing to buy Indian assets. Expectations are that strong economic growth coupled with rising consumer spending in India could push valuations much higher. The rupee may begin to test resistance levels this week.
|
Sterling Pound / Dollar DGBP (US $ quoted in cents per Pound) |
|
The pound may trade on either side of $1.60 this week. There has been increased interest in the pound when it has fallen below this level, helping the pound to hold up above $1.58. Much of the downward pressure on the pound continues to revolve around concern over the United Kingdom’s sovereign finances and weak economic conditions, but also may reflect some short-term focused market activity. If the pound manages to hold above $1.60 it may begin to head toward $1.64 in the coming weeks before a reversal is seen. Firm direction may not be seen until market participants get a better sense of many of the underlying trends, however. This week’s Bank of England’s monetary policy meeting may provide some direction.
|
Japanese Yen / Dollar DJPY (US $ quoted in cents per 100 Yen) |
|
The Japanese yen is likely to continue to decline against the U.S. dollar. Support at 108 cents may not hold and the yen could head toward 106 cents later in the week. The Bank of Japan (BOJ) has been increasingly content with a weakening yen as concerns have been rising over weak economic conditions and deflation. Some of the recent downward trend in the yen may reflect a strengthening U.S. dollar. There has been increased market expectation that the Federal Reserve will raise interest rates sooner than had been expected just a few weeks ago. The BOJ meanwhile is expected to keep interest rates lower longer than its U.S. counterpart.
|
Further Information
Full details on all of our products and DGCX news can be found at www.dgcx.ae. Alternatively, if you would like to speak with a Relationship Manager, please contact us.
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. |
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). |
|