Last week witnessed mixed performance in the global commodity markets covering energy, metals and agriculture products. While indifferent macroeconomic performance (mainly the US jobless claims) reignited growth concerns, the commodity market undertone still appears to be bullish given the combination of supply side apprehensions, weather issues and improbability of a demand collapse.

While crude prices stayed steady, the outlook is constructive because of supportive data. Gold appears poised for a next move higher because of favourable factors. Agricultural market is increasingly being driven by weather concerns although some relief was felt with Russia's decision to end grains export embargo. In the northern hemisphere, it would be weather-driven market from June to August.

Although experts hold conflicting views on China's growth prospects and commodity demand, latest reports suggest that the Chinese economy and demand for key commodities are set for slower growth in 2011 than in previous years, but still at elevated levels. Inflation concerns and desire to cool the scorching pace of growth have necessitated regular monetary tightening.

So, overall, in the commodity markets, fundamentals are beginning to reassert themselves. It is important to know if a particular commodity market is in deficit or surplus. Prices of a commodity in deficit cannot stay softer for long; and similarly, prices of commodity in surplus will sooner rather than later correct downward.

While there are no apprehensions of a global demand collapse, continued high energy prices and inflations are seen eroding economic gains. Governments have to reconcile and balance between growth and inflation. In other words, uncertainties abound, but the general outlook for commodities is more constructive.

Gold: Prices bounced up later in the week on weakening dollar and lower-than-expected US jobs data. Overall, factors supportive of gold are coming to the fore – concerns relating to inflation, economic growth and geopolitics. So, investor interest is likely to be retained.

The latest gold demand trends report issued by World Gold Council point to positive response of physical demand for jewellery at lower prices. Bar and coin demand has been strong in China because of inflationary fears and limited domestic investment channels.

Gold, it appears, is poised for further price gains in the coming months. According to technical analysts, the yellow metal threatens resistance at 1552 while silver drifts lower in range toward 33.75. This would push the ratio higher. The 200-day averages near 1390 for gold and 30.50 for silver strengthen the bull view.

Base metals: Weak manufacturing data are stalling prices. The mood in China, world's significant player in metals, is one of caution. Credit has been tightened several times in recent months. While market participants are cautiously optimistic, the ongoing stock draw downs point to emergence of restocking demand sooner or later. It could happen in the second half of the year.

Many are speculating that the pace of credit tightening in China would slow in H2 where power cable sector, household appliances and auto as also construction sectors are doing well and would continue to do so. At some stage the fundamentals, especially in metals such as copper, will assert themselves in which case price dips should be viewed as buying opportunity.

Over a longer timeframe, aluminium prices have the potential to increase because of rising cost of production. According to technical analysts, the downturn in aluminium targets the 2550/2500 area as the summer chop continues. Copper needs to sustain a break under 8900 to confirm lower in range toward 8500. The medium term outlook is bullish.

Crude: Supply concerns spurred by as yet unsettled geopolitical conditions underpin prices; and yet, the market is seen pausing a little before moving for the next round of spurt. Demand continues to remain fairly robust, although high energy prices have pushed inflation across the world to levels seen unbearable. Supplies are unlikely to match the robustness of demand. Whether geopolitical conditions would worsen is anybody's guess.

Technically, the momentum is seen unwinding. WTI and Brent look to drift toward range lows. Buying interest is expected near 95 and 108. Above the 105 and 118 highs would revive the upside. The dominant view is bullish towards 115 and 124 areas.

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