Precious metals outperformed the non-agricultural commodities this week, with MCX silver futures (September contract) up 6.21 per cent at Rs 56,949, and the gold futures up 2.36 per cent to Rs 30,877, owing to the outcome of FOMC meeting minutes that showed the central bank was considering another round of monetary stimulus.

Gold rallies

Gold, a haven bet against inflation, reached four- and-a-half-month high on concerns that more stimulus may trigger higher inflation in the near future.

Rising investment (ETF) demand and central bank purchases are also supporting the rally in gold. Imports by India are likely to fall by as much as 26 per cent due to high prices affecting physical demand, according to sources.

Crude oil, the top-performer last week, was range-bound this week due to profit-booking as continuous rally in prices had taken it to the overbought zone.

On the MCX, while near-month futures contract registered a negative return of 0.58 per cent, on the NYMEX, the benchmark contract ended marginally up by 0.15 per cent. Although prices have slightly eased, oil is still on track towards the biggest monthly gain since the start of 2012, up 8.64 per cent as supply threats and hope for further central bank stimulus stoked prices to the highest.

Eyeing riskier assets

The base metals complex also turned positive after the outcome of FOMC meetings minutes, as the statement raised investor’s appetite to focus towards the riskier assets. Nickel was the top-performing metal, registering a gain of 4.83 per cent on the MCX, followed by lead and zinc which moved higher by three per cent each.

Copper rose by just one per cent on the MCX as the metal is still in a range due to “hopes and fears” relating to the global economy.

On the agricultural front, profit-booking was seen across commodities except soya complex which registered a decent gain on a weekly basis.

Soya oil futures were the top performers rising on global cues, a weak rupee and good demand in the local spot markets. Though soyabean and mustard also rose, tracking firm cues from overseas markets, recent rainfall in oilseed-growing central and northern India capped the upside.

Rains in major agricultural growing areas has triggered profit-booking in many commodities but the underlying fundamentals are limiting the downside in prices.

While jeera prices are supported by some fresh overseas enquiries amid thin spot supplies, in turmeric futures traders are looking to buy at lower levels due to decline in sowing area. Chana, despite falling on a weekly basis, may witness some bargain hunting at lower levels due to upcoming festive season demand and thin supplies.

(The author is Associate Vice-President — Commodity Research, Motilal Oswal Commodities. The views are personal.)

(This article was published on August 25, 2012)
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