Commodities have been benefiting on lack of alternate investments and global realignment of the US dollar. Tight supplies of food, limited availability of land, competition in land usage for production of biofuels, and rising demand, are creating serious food supply shortages and triggering rising food prices around the world. There is a growing number of nations which have stopped or put export curbs on rice and other food grains. Some of the countries as a pre emptive measure against higher prices of essentials have increased their buffer stocks. This trend if it continues could create a global shortage. The percentage of income spent on food is on the rise. Higher food prices will result in workers demanding more salaries which again pushes up the cost. This chain reaction will have the multiplier effect could lead to a sustained global recession and growth even developing countries like India and China could be affected (despite state control on prices).
The effect of higher prices of agro commodities will result in equity markets under the grip of the bears. Gold will rise due to investment demand and not due to physical demand. For the average man on the street higher gold prices mean nothing to him and higher prices of food means everything to him. In democratic world governments could get toppled if prices of food products rise endlessly as it is the common man which turn up in huge numbers and vote whenever elections are held. Unlike myself and other who have never voted.
Crude and US dollar continues to dictate gold, silver and all metals. Metals benefited after IMF put US economic growth forecasts at 0.50% in 2008 and 0.60% 2009. The outlook differs from that of the Federal Reserve staffers who expect “growth heading back above potential in 2009.” There is nothing special on IMF growth forecast as the Fed chairman has earlier acknowledged higher chances of the US economy moving into recession. US recession chances have already been factored in by the markets.
COPPER -- MAY FUTURE -- INTRA DAY PIVOT: $392.0
Copper has to break $402-$404 zone for $417. On the lower side as long as $388 and $382 holds on closing basis, downside will be limited.
NYMEX CRUDE OIL --FUTURE -- INTRA DAY PIVOT: $110.70
Crude oil targets $116.70 on a break of $112.20. On the lower side as long as $108.20 holds downside will be limited.
INDIAN RUPEE (USD/INR)
Indian rupee should gain on the back of a weaker US dollar. For the rest of the week if the rupee fails to break 40.10 then it will gain to 39.80 and below. Rupee will be volatile like the Indian stock market which rises one day only to fall the next day. The presence or absence of state run banks will be the key. There is short term demand at lower levels while exporters are hedging their receivables on any five to ten paisa weakness. Forward premiums should remain steady with six months premia expected to trade in 1.90% -2.10% narrow range. All eyes will be once again on the inflation numbers tomorrow.
HAPPY PROFITABLE TRADING
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-- Posted Thursday, 10 April 2008 | Digg This Article | Source: GoldSeek.com
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