Macroeconomic concerns continue to haunt the global commodity markets resulting in choppy conditions. All precious metals were up on the week with gold rising nearly one per cent and silver 3.9 per cent week-on-week. Latest data suggest, global steel production has risen strongly in the first six months of the year, pointing to a new record in the making that is 1,500 million tonnes.

Despite recurring concerns over sluggish growth in the developed world and inflationary pressures in the emerging markets, steel output performance has been robust. China's contribution has, of course, been immense. Latest Chinese trade data for June continue to suggest strong demand for a range of commodities, with little evidence to back fears of a slowdown.

China's copper imports in all forms have risen to their highest level since January. In energy commodities, coal imports grew 9 per cent year-on-year, natural gas imports hit an all-time high and China returned to the status of net diesel importer.

Palladium, tin and copper imports have been robust. Speculation over the US debt ceiling is far from abated. Importantly, hints of QE 3 are emerging which should provide a booster dose for the market. At the same time, there are also reports of the US commodity futures market regulators readying to further tighten the role of speculative capital.

Europe's sovereign debt risks, high crude prices, build up of inflationary environment and continued loose money policy in the US all impact the currency markets with the dollar displaying high volatility.

The global markets are still at the crossroads and are looking for a clear direction. Non-fundamental factors continue to play a notable role in price performance.

Gold: The yellow metal extended the recent gains and breached the psychological $ 1,600 an ounce level last week on the back of debt risks relating to Greece. Although over the week, gold was up by nearly one per cent, in London on Friday, the PM Fix was at $ 1,602/oz, just a tad more than the previous day's $ 1,601/oz. Silver followed suit but slightly lower with Friday AM Fix at $39.67/oz, versus the previous day's $39.78/oz.

The agreement on new bailout package for Greece is expected to reduce the severity of concerns and encourage some liquidation in the coming days. However, continued macroeconomic concerns, sovereign debt issues and speculation over US debt ceiling sustain investor interest. It is a seasonally weak period for physical demand. However, for any reason if investor interest wanes, prices will face stiff correction. But the overall environment is highly supportive for further gains to test newer highs although there will be short-term correction en route.

As is widely known, silver prices have largely followed gold despite weak fundamentals. According to technical analysts, gold is reaching the cap of range highs and risk is lower in range towards 1,550 at which levels buying opportunity should be used as the metal is set to race to new highs towards 1,635. In silver, buying opportunity will emerge towards dip to 37 and a break above 41 opens new target near 43. The medium term outlook is bullish.

Base metals: Aluminium and zinc outperformed over the week, both up 5 per cent week-on-week reflecting the shortage of material actually available to the physical market. Macroeconomic concerns continue to dominate short-term price action. European debt crisis and deadlock over US debt ceiling are factors the market cannot ignore. Once the concerns abate, fundamentals will assert themselves.

Copper and tin are expected to recover strongly in the second half of the year. Mine supply uncertainties and pick up in Chinese imports will propel copper higher. There is a view that the current rally in copper may be premature. Physical buyers are somewhat wary of prices above $ 9,000 a tonne.

However, the fundamentals are quite strong; and so, over the quarter copper prices have the best upside potential. Aluminium is supported by global demand growth and energy-led cost inflation. Technical analysts are bullish about aluminium with the metal rallying towards 2,600. A break above would target 2,640. Any down side in copper is expected to hold near 9,500 for a bounce towards 10,000 target.

Medium term outlook is bullish.

Crude: Torn between support of its own fundamentals and restraining influence of headline risks, the commodity is struggling. The market is likely to remain range-bound for this quarter. Technically, the picture looks bullish for Brent crude. Look for a break above 119 to open new target at 120 and then 127. For WTI a close above 100 would confirm bullish view towards 101 and then 103.

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