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-- Posted Thursday, 8 May 2008 | Digg This Article | Source: GoldSeek.com

INSIGNIA CONSULTANTS
Asian Metals Market Update for 8th May, 2008
EXPECTED TRADING RANGE
COPPER AND CRUDE OIL -- EXPECTED TRADING RANGE
COPPER MAY 08   -- $382.00 - $396.00	NYMEX CRUDE OIL   - $120.70. - $127.20
This is just an excerpt of the main report. To receive a copy of the full report mail a request to sms@insigniaindia.com
GENERAL MARKET CONDITIONS
Today is a black day for the Indian commodity markets as the Indian government has banned futures trading in chana, soy complex, rubber and potato. It is not clear whether contracts being traded would be allowed to expire normally or would be settled at Wednesday’s closing prices. Sometime years back the government had discontinued trading in Urad and wheat futures also. There is no evidence that futures trading spikes prices of essential commodities in India. Over the past few months traders and investors had reduced their investment in agri commodity futures due to speculation that these could be stopped anytime soon. If futures trading jerks up prices substantially then the US government should have stopped soft commodities trading in CBOT, NYBOT and other exchanges. The global food price spike is partially due to investment demand in CBOT, NYBOT and other commodity exchanges in different countries AND NOT FROM INVESTMENT DEMAND IN INDIAN COMMODITY EXHANGES. In India the agro price rise is largely due to supply price pressures and a continued rise in demand.
If the US government has no intention of stopping trading/investment in agro commodities then there is no reason for the Indian government to stop the same. I was asked by some of my clients whether gold and silver will also be stopped some day. The Indian general election will be held between November 2008 and May 2009. If stopping precious metals trade gives substantial vote to the government, it will do so. The government cannot distribute free gold to voters in their election manifesto just like distribution of free rice or rice at Rs.2 per kilogram once they are voted in power. If gold was cheap the political parties would have distributed gold also. Everything is fair in Indian politics.
Crude oil has detached itself from movement in the US dollar. Movement in crude oil prices suggest that the options markets has a big role to play and a part of the rise in crude oil is attributed to covering by option sellers. Frankly, very few traders and investors expected crude oil prices to rise near $125 at this time of the year. Long term investors will exit their investments once crude oil breaks $150 as incremental returns will fall over $150. Investors have made over 100% returns when crude oil prices rose from $50 in early 2007 to now. Crude oil over $150, investors will not get 100% returns in twelve months once crude oil breaks $150. If crude oil prices float over $200 for a long time whether in 2009 or 2010, there will be real evidence of a global slowdown. Even emerging markets like India where petrol and diesel prices are subsidized, the government will start reducing subsidies. The rise in crude oil prices may last another year and a half and thereafter the pace of the rise will fall.
Fed Chairman Ben S. Bernanke, seeking ways to stabilize money markets, will ask Congress for authority to pay interest on commercial-bank reserves this year. The central bank isn't authorized by Congress to begin making such payments until 2011. Allowing interest on bank reserves may allow the Fed to pump more funds into the banking system without pushing its main policy rate lower, in effect separating action to boost liquidity from monetary policy. If the Fed and other central banks boost liquidity as a cover up of their past policy failures, then more and more assets bubbles will be created. This time the bubble is commodity prices the next could be the emerging market real estate bubble. Long term gold will rise. Short term there could be some more losses.
GOLD -- JUNE FUTURE
If gold fails to break $950 for the rest of 2008 then it will fall to $737 and $700. Initial support around $819.80. This is just the technical picture. Long term targets of $1100 and $1200 are intact.
INDIAN RUPEE (USD/INR)
The stance of the RBI will be very important for the rupee. If there is state run intervention the rupee will gain back below 41.0. If there no intervention then the rupee will weaken to 41.68 and below. Importers are covering their near term payables on dips while exporters are canceling and rebooking their receivables.
HAPPY PROFITABLE TRADING
Disclaimer : Any opinions as to the commentary, market information, and future direction of
prices of specific currencies, precious metals, base metals, or equity indices reflect the views
of the individual analyst, In no event shall Insignia Consultants or its employees  have any liability
for any losses incurred in connection with any decision made, action or inaction taken by any
party  in reliance upon the information provided in this material; or in any delays, inaccuracies,
errors in, or omissions of Information.

-- Posted Thursday, 8 May 2008 | Digg This Article | Source: GoldSeek.com

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