Global commodity markets came under pressure last week with the re-emergence of growth concerns in China and the US as well as unresolved European sovereign debt crisis with Spain as the focus of attention this time. Major commodities — be they energy, base metals or precious metals – faced price declines as punters exited their long positions on the bourses.

Crude oil market softened over the week. In the base metals complex, nickel and tin were down week-on-week; but lead outperformed over the week with a rise of 3.2 per cent following positive demand signals. The precious metals complex was under pressure with gold, silver and platinum down by 1.5 per cent, 1.8 per cent and 1.3 per cent respectively. Palladium, on the other hand, performed exceptionally well with a rise of 3.6 per cent week-on-week.

Global crude steel output figures for March suggest a rise of a little over 2 per cent in production month-on-month to an annualised aggregate of 1,557 million tonnes. Since December 2011, global steel output has risen by about 13 per cent with Europe and Japan contributing. Very clearly, the global commodity markets are not out of the woods. We need sustained flow of positive macroeconomic data and further reduction in geopolitical tensions. However, in the current scenario, there may be buying opportunities in the weeks ahead especially in base and precious metals whose prices are turning softer.

There is now general expectation that Chinese demand which has been tepid in the last couple of months will begin to pick up after Q2 and the US economy will continue to show positive growth trend. In the event, demand will return to the market. Crude and copper – both growth-driven commodities – are sure to benefit as their fundamentals are still positive for prices.

So, the emerging picture suggests a limited downside from here on (unless of course the global growth takes a plunge or other unanticipated shocks overtake the cautiously positive sentiment). For market participants, it may do well to be alert to price dips that would favour buying. There is strong belief that gold and palladium among precious metals as well as copper and lead among base metals are good candidates to train one's attention on.

Gold: The yellow metal has got trapped in a narrow price range and has been struggling to wriggle out with little success. The euphoria over the possibility of quantitative easing has faded. Speculative interest is tepid. CFTC data showed net non-commercial futures positions are back to lows seen long ago say early 2009. On the other hand, belief is gaining ground that the pullback may have been overdone.

Suspension of strike by Indian jewellers following imposition of excise duty on jewellery and high demand season (marriages and the approaching auspicious Akshaya Trithiya day) has not generated any excitement. No wonder, international prices have stayed rooted to a range. Physical inflows into markets have slowed. The physically backed ETPs have remained resilient though.

In London on Friday, gold PM Fix was $ 1,642 an ounce, down from the previous day's $ 1,650/oz. Silver was up with Friday AM Fix at $ 31.79/oz versus previous day's $ 31.47/oz.

What will be the trigger for gold to break out of the range is difficult to assert. But it is clear that the upside potential would be realised only when gold's safe haven status begins to get asserted which simply means other asset classes should perform poorly.

According to technical analysts, gold is stabilising over nearby support in the 1,630 area. One can look for buying interest to emerge at 1,600 which may underpin a move towards 1,700. At 31.00 silver looks bullish with target of 33.50 area. The medium term outlook is neutral.

Base metals: Copper (up 1.8 per cent) and lead (up 2.4 per cent) had a strong close to the week with Friday LME cash at $ 8,240 a tonne and $ 2,126/t.

Lingering concerns over global growth and in particular, hard landing in China are still weighing on the complex. Financial market participants have kept away from this market. Demand conditions in Q2 are expected to be weak especially in China which, in turn, will have a bearing on prices. So, in the short-term prices could turn softer.

However, outlook for the second half of the year appears good on current reckoning. In the event, every fall in Q2 prices would convert into a buying opportunity for benefit to accrue in H2. Clearly, positioning in the base metals market has been light. There is lack of conviction at present. We need sustained flow of positive macro data.

The technical picture suggests that copper has broken above the resistance near 8,140; but the market could trend lower towards 8,000 and below. As for aluminium, selling interest near 2,125 is expected to cap upticks. The medium- term outlook is range-bound.

Crude: Last week commenced with a selloff in the crude market but prices managed to stay range-bound later. With Iran returning to the negotiating table, the speculative long positions that were built in anticipation of an escalation of tensions were quickly liquidated.

The fundamentals are constructive; but the sentiment is not exactly positive. Prices are likely to stay range-bound for some time until there is a trigger for a strong movement.

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