Even though choppy conditions marked trading in global commodity markets last week, and a glimmer of hope that things will only improve from hereon was raised as prices began to stabilise and firm up, the overall still mood stays sombre because of nervous sentiment, mixed macroeconomic data and risk aversion. There are several events lined up for the month each of which will be watched with keen interest. The OPEC meeting held in Vienna did not throw up any great surprise. Clearly, the cartel is in quandary whether or not to reduce output. Greek elections on Sunday are crucial.

Last week, prices of many commodities – energy, metals and agriculture – edged up. Importantly, all precious metals gained with platinum outperforming others with a rise of 5.4 per cent to $1,493 an ounce in London following concerns over supply cuts from South Africa. Rise in gold too supported platinum. Gold was up 3.2 per cent over the week to $1,627/oz as the prospect of support from central banks improved. Silver moved up by a modest 1.7 per cent and palladium 3.1 per cent.

Among base metals, copper improved by 3 per cent over the week testing $7,500 a tonne in London on Friday. SHFE stocks continued to draw while Shanghai copper premium range rose a further $10/tonne, according to reports. Zinc was up 2.7 per cent to $1,904/tonne and lead 1.3 per cent. Aluminium, nickel and tin were down week-on-week. The week also marked the release of USDA's June WASDE report which turned out to be bullish for soyabean and bearish for corn.

Gold: Despite conditions ripe for a major upsurge, gold prices have generally struggled to gain traction. Escalating uncertainties surrounding global growth in general and Europe, in particular, have capped the upside as investors are undecided whether gold should be treated as a safe haven asset or risky asset.

Notwithstanding all this, the precious metal gained last week. The dollar weakened against the euro and expectation of further quantitative easing renewed. Investment demand has remained resilient. In London on Friday, gold PM Fix was at $1,627/oz, up from the previous day's $1,6514/oz. Silver, however, bucked the trend with Friday AM Fix at $28.66/oz, down from the previous day's $28.88/oz, although over the week there was a gain.

In the world market, gold prices are expected to continue to stay under pressure and trade in the broad $1,575-1,650 an ounce range. The dollar is most likely to remain strong and bouts of euro strength may allow gold prices to move up. However, there is little support from the physical market. Demand is tepid. So, much of gold price movement is based on hope rather than on any solid fundamental reason.

Base metals: Concerns over European debt issues and slowdown in China are on top of market participants' minds. While prices have been weighed down by uncertainty, expectations of coordinated global policy action to address the current issues have generated some hope. Clearly, solid evidence that global economic activity was improving is necessary.

The key question is whether China's growth momentum will rebound in the second-half. Copper can take a hit if growth signals deteriorate. On the other hand, nickel and aluminium prices have the least downside, followed by lead and zinc.

> gchandra@thehindu.co.in

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