Provided by CPM Group, Vol. I, No. 14, 27 Sep 2009 |
|||||||||||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||||||||
Macroeconomic fundamentals continued to drive commodities prices last week as positive sentiment is being counterbalanced by economic data that is not particularly inspiring. In the United States, durable goods orders were down 2.4% in August and existing home sales fell for the first time in four months to a seasonally adjusted 2.7%. In the face of continued economic uncertainty and a global economy that is being propped up by stimulus measures, gold and silver prices should continue to draw on support from strong investment demand. Into October, the safe-haven status of gold and silver in addition to some seasonal demand strength may keep these metals’ prices firm. Meanwhile, the macroeconomic supports in the oil market could be fleeting. Oil could break out of its range and trade back below $65, after being locked in the $65 - $75 range since July. If this resistance level is breached, it would signal that market participants are refocusing on bearish fundamentals. Even if oil demand is improving, any rebound will likely be cushioned by spare production capacity and high inventory levels. The main factor driving the commodities markets over the next few weeks may be the shaky, albeit improving, economic outlook. |
The dollar staged an impressive rebound this week after falling to new lows against several major currencies. After the FOMC statement on Wednesday, the dollar weakened quite sharply, but then within an hour reversed course and made new highs against nearly all major currencies for the day. By Friday, the dollar had steadily gained back its losses to close nearly stronger against the euro on the week, and significantly so against the British pound. Only the yen continues to strengthen against the dollar, possibly as a result of Japanese corporations having their half year end next week and money flowing as part of repatriations and hedges. Major economic data this week was disappointing and has called into question the vigorous immediate global rebound that many market participants had been expecting. Further doubts of the rebound should be beneficial for the dollar as carry trades may be unwound as such trades had been depressing the dollar up to this week. The yen is unpredictable at this juncture and may fall slightly lower to levels that are ultimately unsustainable against the dollar. This week, the dollar may continue rebound against most major currencies. |
||||||||||||||||||||||||||||||||||||||||||||||||
DGCX Prices & Daily Volumes |
|||||||||||||||||||||||||||||||||||||||||||||||||
|
ADV (4,215) |
||||||||||||||||||||||||||||||||||||||||||||||||
Economic Indicators
|
|||||||||||||||||||||||||||||||||||||||||||||||||
COMMODITIES | |||||||||||||||||||||||||||||||||||||||||||||||||
Crude Oil | |||||||||||||||||||||||||||||||||||||||||||||||||
|
WTI oil traded between $65 and $72 last week. There was good reason for prices to break out of the $65 - $75 range where prices have moved since the second half of July even though the market’s fundamentals have not changed much. In a move above $75, the oil market could have taken cues from improving confidence among U.S. consumers, a weakening dollar, and market chatter about an improving demand outlook. Likewise, market awareness regarding large volumes of spare production capacity and high inventory levels worldwide, coupled with poor U.S. housing sales data had the potential to force oil prices toward $63. Over the coming weeks, inventory figures may continue to be difficult to gauge as the usual patterns are more abnormal during the months between the summer and autumn period. This could cause some volatile prices swings. EIA data for 18 September showed a 2.86 million barrel build in oil inventories while the market had expected a drawdown. This week, WTI oil could remain range-bound. However, a pullback is likely over the near-term. Downward momentum could emerge and prices may test $65 this week if U.S. inventories and economic data encourage hesitation about the potential recovery in demand. |
||||||||||||||||||||||||||||||||||||||||||||||||
Gold | |||||||||||||||||||||||||||||||||||||||||||||||||
Gold prices are expected to continue to be volatile this week. Prices may break out of the already wide $30 band from last week, when gold traded between $990 and $1,020. There continues to be firm investment demand from institutional investors and in parts of the Middle East and India. There appears to be some tightness in prompt delivery metal, reflecting recent demand from investors and some central banks. Combined ETF hold holdings reached another record level last week, 55.8 million ounces on 23 September, although holdings were down slightly the following day. The upward momentum in gold prices could be capped by any recovery in the U.S. dollar. Investors’ concerns over financial and economic conditions are expected to continue to stimulate investor buying of gold. |
|||||||||||||||||||||||||||||||||||||||||||||||||
Silver | |||||||||||||||||||||||||||||||||||||||||||||||||
Silver prices could most likely move between $16.00 and $17.75 this week. A strong investor-driven rally may push prices sharply higher. In such an environment, silver prices have the potential to forcefully move toward $18.00 — $18.25. On the flip side, if prices break below $16.00, then a quick move toward $15.50 or perhaps even $15.25 cannot be ruled out. This seems unlikely, however. Over the past few weeks silver prices have been extremely volatile trending higher overall. High prices have encouraged many individuals in North America, Asia, and the Middle East to sell their old scrap to obtain high silver prices for their metal content. Despite higher prices, demand for silver has been holding up fairly well, both from industrial users of silver and from investors. Investors around the world have been flocking into silver for a variety of reasons, ranging from safe haven investment to hedge against economic uncertainty. Many bargain hunters have been eagerly waiting for dips below $16.00 to take the opportunity to buy at these levels. Combined ETF silver holdings were 426.2 million ounces at the end of last week, up 0.2% from 425.5 million ounces on 18 September.
|
|||||||||||||||||||||||||||||||||||||||||||||||||
CURRENCIES | |||||||||||||||||||||||||||||||||||||||||||||||||
Euro / Dollar DEUR (US $ quoted in cents per Euro) | |||||||||||||||||||||||||||||||||||||||||||||||||
The euro may continue to strengthen against the dollar this week. While the euro gave up some of its sharp gains late last week, it remains in an upward trend against the dollar. The European Central Bank meanwhile announced that it would end its 84-day U.S. dollar funding operations after 6 October, but would continue its seven-day repurchase operation. The expected decrease in the availability of U.S. dollars has provided some dollar strength, but it could prove to be short-lived. There also may have been some short-covering as the announcement was made public, providing perhaps a stronger rally in the U.S. dollar. The euro may move to test $1.45 this week. A break below this level could spark increased technical and speculative activity, pushing the euro toward $1.43. |
|||||||||||||||||||||||||||||||||||||||||||||||||
Indian Rupee / Dollar DINR (US $ quoted in cents per 100 Indian Rupees) | |||||||||||||||||||||||||||||||||||||||||||||||||
The Indian rupee could move in a slightly wide range this week, between 207 cents and 209 cents per 100 rupee. There has been no fresh fundamental news affecting the rupee. Last week the rupee traded around 207 — 208 cents, heading slightly lower against the U.S dollar. Strong dollar demand from domestic importers of oil and other commodities weighed on the rupee. Furthermore, a slight dip in domestic equity markets also put additional pressure on the rupee. Sensex, which is the Indian benchmark stock index, fell by 48.2 points last week as investor booked profits. |
|||||||||||||||||||||||||||||||||||||||||||||||||
Sterling Pound / Dollar DGBP (US $ quoted in cents per Pound) | |||||||||||||||||||||||||||||||||||||||||||||||||
The pound may move between $1.60 and $1.65 this week. Early last week the pound recovered after trending lower for several days and falling slightly below $1.615. The pound then recovered, moving toward $1.65, but fell sharply once more soon after. This came amid the Bank of England’s announcement that it planned to suspend its three-month dollar repurchase operations after 6 October. The BOE also stated that it will offer seven-day funds until January. The move in the pound may not have been so much based on pound weakness as it was on U.S. dollar strength. Financial and economic conditions in both the United Kingdom and the United States remain weak. Curtailing the supply of dollars may have provided temporary U.S. dollar strength. A break below $1.60, however, could spark increased weakness in the pound. |
|||||||||||||||||||||||||||||||||||||||||||||||||
Japanese Yen / Dollar DJPY (US $ quoted in cents per 100 Yen) | |||||||||||||||||||||||||||||||||||||||||||||||||
The Japanese yen could weaken against the U.S. dollar this week. The yen is expected to head lower toward 107 cents — 108 cents. Last week the Japanese Yen was very volatile. The yen was somewhat choppy against the U.S. dollar early in the week but then rose sharply as the week progressed. Last week the yen rose 1.7%. The Japanese government stated that it would not interfere in the currency markets, which put an upward pressure on the yen. However, a rising yen already has been hurting the Japanese exports. Japanese exports fell for the eleventh consecutive month in August. On top of that, Japanese debt to gross domestic product ratio is almost three times that of U.S. All of this could weigh on the Japanese yen. |
|||||||||||||||||||||||||||||||||||||||||||||||||
Further Information |
|||||||||||||||||||||||||||||||||||||||||||||||||
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 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). |
FTSE Mondo Visione Exchanges Index:
Dubai Gold & Commodities Exchange Weekly Market Views - 27 September 09
Date 28/09/2009