Gold, silver surrender gains; crude oil prices rising

The global commodity markets displayed a mixed performance last week with a host of factors including geopolitical developments, macroeconomic data, currency gyrations and events in Greece held sway.

The crude oil market appeared to have broken free from a bout of range-bound trading of last few weeks following supply worries and severe winter conditions.

Metals suffered a carnage on Friday ‘when the Greek pendulum swung back to the negative side' as one analyst put it.

Expectation that the Chinese monetary policy will continue to remain tight for some more time was not helpful either.

Gold and silver surrendered some of the gains made in the previous week on strengthening dollar and long liquidation.

While the overall mood in the market is not unduly pessimistic, in the short-term, there are concerns relating to the euro zone. Chinese import data also are causing some anxiety.

Preliminary data for January point to a month-on-month decline in iron-ore and copper imports. With high inventory, there could be downward pressure on these two commodities, until buyers return to the market.

Gold: Gold dropped 1.3 per cent week-on-week and silver 1.1 per cent and palladium 2.0 per cent.

Better than expected US employment numbers and dollar strength led to profit taking.

There is expectation that physical demand will come to support gold prices.

Buyers in price-conscious Asia continue to return to the market despite elevated prices on speculation over an imminent bull-run in gold. There are reservations in some quarters though.

According to technical analysis, there is near-term risk for gold to dip toward 1,645 from where one can look to go long.

Above 1,765 would confirm the view for a move toward 1,800.

As for silver, breaking above 33.55 would signal upside extension toward 35.70. The medium-term outlook is neutral.

Metals: The metals complex has had a fairly good start to 2012 with supportive macroeconomic data flow. Although not out of the woods, the situation today is unlike the acute pessimism of the last two quarters. For the momentum to sustain, it is necessary that actual growth continues to meet market expectations. Another factor is of course China.

The possibility of a temporary surplus in many metals can potentially lead to a moderation in base metals imports in the next few months. Although a temporary blip in price is not ruled out, copper looks fundamentally the metal to watch.

According to technical analysts, there is reason to be bullish for copper. Support at $ 8,280 will underpin a move toward the $ 9,000 area. For aluminium, a move above $ 2,310 will confirm a bullish view toward $ 2,340/2,365 area. The medium-term outlook is range bound.

Crude: Oil prices have attempted to breakout to the upside. A combination of positive macro picture and signs of escalating geopolitical tensions, the upside risks to the market are rising. Demand conditions in Asia are robust. European cold has been supportive for the prompt market.

Technically, the picture looks bullish for crude. A break above 100.40 in WTI would confirm further upside toward 102.25 and then 103.90, analysts have said. In Brent they recommend to buy dips toward 114.75 with an initial upside target of 119. The medium term outlook is said to be neutral.

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