Haven demand supported precious metals, whereas economically sensitive commodities such as metals moved down sharply due to economic slowdown in the world’s largest consumer — China.

Commodity prices were mixed last week due to lack of direction from the global economy. Gold was the best performer, gaining more than one per cent (MCX front month) on a weekly basis. The yellow metal on COMEX continued its strength above $1,600 an ounce but was unable to extend its rally to new highs as investors remained on the sidelines due to lack of triggers from FED and the European Central Bank. On the domestic front, physical demand was still weak as a weak rupee is keeping bullion prices well supported.

Gold imports during January-June were around 250 tonnes, according to Bombay Bullion Association data. In the second quarter, imports dipped due to high prices as the bullion was trading above Rs 30,000/10 g and also due to tax levies which prompted jewellers to go on an indefinite strike. The second half might witness better demand compared with the first half mainly due to festive season in India.

Nickel, worst hit

Haven demand supported precious metals, while economically sensitive commodities such as metals moved down sharply due to economic slowing in the world’s largest consumer of base metals — China.

Nickel was the worst performer in the complex as it fell by over 4.5 per cent from its peak of Rs 899.7 (MCX near-month contract) in the preceding week. Nickel was followed by zinc and lead which fell by almost 0.5 per cent each. Copper closed lower, too, as China's weak trade figures and a nine-month low in crude oil imports reinforced the picture of a slowing economy.

crude oil Resilient

Crude oil showed some resilience as it continued its northward journey for the second straight week on the back of geopolitical tensions in West Asia and due to fall in the US inventories as indicated by the EIA inventory report.

The International Energy Agency (IEA), in its latest report, has lowered its projection for Chinese demand for oil products for 2012 as a slowdown in the world's second largest economy crimps energy consumption. It also indicated that global oil demand growth will fall next year below the already very weak levels of 2012 due to a slow-down in economic activity.

Agricultural commodities witnessed some profit-booking after a continuous run-up in prices. Almost all agri commodities on NCDEX fell with turmeric registering a loss of over 7.5 per cent followed by castor seed and jeera. The only commodity that showed strength was soyabeans which rose more than four per cent on Friday tracking gains in the US market, although rainfall in the oilseed growing areas of India kept the upside limited. Top soyabean-producing Madhya Pradesh last week got 25-40 per cent higher rainfall than normal. Indian farmers have cultivated soyabean on 10.54 million hectares as on August 8 compared with 10.01 million hectares at the same time a year earlier, Farm Ministry data showed. On weekly basis soyabean was the only commodity amongst the top traded commodities on the NCDEX to register a gain of almost 0.5 per cent .

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

(This article was published on August 11, 2012)
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