Silver @ 22$ - 33333 Mcx

It's been a good week for silver, with the precious metal gaining 4% to $21.97 an ounce. Deflationary fears and the use of QE as an instrument to stimulate growth and devalue the US dollar have encouraged investors to diversify into assets that will protect their wealth. A drop in US consumer confidence and weaker-than-expected Richmond Federal Reserve Manufacturing Index didn't help the situation, as it gave the Fed more ammunition to begin another round of QE. The ensuing broad decline in the US dollar pushed silver to a 30-year high this week. While silver is often called the poor man's gold, there are a number of factors that may see silver outperform its more illustrious partner in the coming years. Unlike gold, silver is used extensively for industrial applications; as a matter of fact around half of silver demand is consumed for this reason. These applications include silver alloys used in batteries, electrical applications that require superior conductivity such as TVs and microwaves, and as a catalyst for chemical reactions. A large amount of silver is used in photography and of course, for jewellery and silverware. In addition to these wide applications, silver is also becoming the metal of choice to use in solar panels for its reflective ability and excellent conductivity. With China at the forefront of solar technology, the country is consuming more and more silver and silver exports have fallen 64% as a result. China is the world’s third-largest producer of silver and accounted for almost 13% of global production in 2009. Thus a reduction in China's exports will suppress the availability of silver globally, which in turn supports the metal's value. Besides the physical appeal of silver, the gold-to-silver ratio suggests that silver could make further headway and outperform its more expensive cousin. The gold-to-silver ratio is currently around 60, whereas in the past it has averaged around 55. Historically, this ratio tends to be mean reverting, which suggests silver has some catch up to do with gold. The popularity of gold has seen it rise to all-time highs, but as investors begin to worry that gold has become too expensive, they are beginning to take a closer interest in silver.

Crude Oil

November crude oil futures traded at $77.81 a barrel on Thursday morning, representing a 3.5% gain on the week. Speculation about a revival in QE has helped reinvigorate a rally in many commodities this week. The expectation of additional QE weakened the US dollar, which in turn rendered commodities, priced in US dollars, relatively cheaper in foreign currency terms. Falling energy stockpiles and evidence of an expansion in Chinese manufacturing sector also contributed the weekly rally in crude oil. On Wednesday a report from the US government's Energy Department showed that crude oil inventories fell by 500,000 barrels in the week ending 24 September. The size of the drawdown was larger than the estimate shown in a survey by Dow Jones Newswires. Meanwhile, declines in gasoline and distillates confounded analysts who were expecting an increase. Gasoline stockpiles dropped by 3.47 million barrels to 222.6 million last week, and stocks of distillates, which include heating oil and diesel, fell by 1.27 million barrels to 173.6 million. A separate report compiled by HSBC Holdings showed that manufacturing in China, the world's fastest-growing oil-consuming country, accelerated for a second month in September. China's Purchasing Managers Index for the manufacturing sector rose to 52.9, the highest in five months. The data was seasonally adjusted and readings above 50 indicate an expansion. Going forwards, crude oil investors should – as always – be very careful about where they place their stop losses, as volatility in the commodity is poised to increase. Although the reintroduction of QE could provide a bullish case for crude oil, China's determination to prevent a property bubble and concerns about the European economy, especially the peripheral region, will weigh on sentiment.

Gold AT 1317$

Gold continued its seemingly inexorable advance this week, reaching a new nominal record high of $1313.45 an ounce on Wednesday. Gold is heading for a tenth consecutive year of annual gains, the longest winning run since 1910. Bullion dealers Kitco International commented that 'most of what we have witnessed in the complex during the month has been clearly based on perceptions of an inevitable second chapter in Fed accommodation'. [1] Speculation surrounding possible additional stimulus measures in the US has increased following a barrage of weak economic data from the world's largest economy. Tuesday's readings of consumer confidence and manufacturing indices point to a stagnating US economic recovery, and the inflationary possibilities raised by a return to quantitative easing (QE) have driven investors towards the safe haven of gold. A poll of bankers, gold miners and analysts meeting at this year's London Bullion Market Association conference forecast that gold would reach $1450 an ounce during 2011, a 10.5% increase from current levels. The bullish mood surrounding gold has also been stoked up by news that central banks, led primarily by Russia and Asian governments, will become net buyers of the precious metal after two decades of net selling. Credit Suisse observed that 'it's quite possible that if there are any further upsets in either the currency markets or the rates markets ... we could get another leg higher and then we'd be looking at the next upside target at $1330'. [2] Holdings in the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, climbed by five tonnes on Tuesday, while buying in India rose on Wednesday as the strength of the rupee helped to shield local buyers in the world's largest democracy.

Crude Oil - Commentary

Crude oil continued to decline on Thursday morning, extending the falls seen on Wednesday afternoon after the weekly inventory report from the US government showed an unexpected rise in stockpiles. Crude oil supplies rose by 970,000 barrels to 358.3 million barrels in the week to 17 September, according to data from the Energy Information Administration (EIA). Gasoline stockpiles also increased, by 1.59 million barrels to 226.1 million barrels. Bloomberg reported that inventory levels had been expected to fall due to the eight day shutdown of the Enbridge Energy pipeline, which sends Canadian oil to the Mid-West of the United States. During the week, oil found some support from a falling US dollar, which weakened in the wake of the Federal Reserve meeting on 21 September. The Fed’s Open Market Committee had intimated that slowing inflation and sluggish growth in the world’s largest economy might require further action, expanding the record $2.3 trillion balance sheet as early as November. Weiss Research commented that ‘the inventory numbers were bigger than expected, but the dollar is the prime driver right now’, adding that ‘once this news is digested, oil will move higher along with the precious metals’. [1] On Tuesday, the private-sector American Petroleum Institute (API) said that crude inventories increased by 2.2 million barrels, confounding analyst expectations of a fall of 1.5 million barrels. The increase in supply arising from the slowing US economy stands in sharp contrast to robust consumption levels in emerging markets, with Chinese demand for oil expanding by 7.6% in August. Barclays Capital caught the mood of the times as it observed that ‘despite the cautious outlook on oil demand still often expressed in market sentiment, the actual flow of data continues to point to extremely robust global demand indications’.

Gold Technical

As per our previous recommendation dated 7th September, 2010 of going Long on Spot Gold, of $ 1265 has been achieved.

As seen the price is almost trading at the long term resistances line (R) Hence, in our view profits on long positions (as per our previous recommendation) should be booked at the current levels and fresh long positions should be initiated on dips for (T) $ 1346 (life time high). Strong support is at $ 1248; until this support is breach buying is advisable.

A sustainable break of $ 1296 level from below could trigger a sharp rally targeting $ 1348 (T).RSI is showing some resistance at current level. Volume and Open interest is firm which indicates further bullishness.

Copper - Commentary

Copper has underperformed over the week, gaining only 0.16% as speculation that China may impose further measures to cool the property market tempered demand for the metal. The People's Daily newspaper in China has reported that Chinese property developers are beginning to struggle with cashflow problems. This comes at the same time that speculation is mounting that China will enforce higher capital-adequacy ratios, which would tighten lending conditions in China. Goldman Sachs is estimating that capital-adequacy ratios in China could reach 15% by 2012. At the moment the largest Chinese banks must meet a capital ratio of 11.5%. Advancements in China's economy carries a huge weight in driving copper prices, as China is estimated to consume around 40% of the world's copper production. Copper, which is used extensively in wiring of homes and buildings, tends to move in line with developments in the property and industrial sectors. The world's second largest consumer of copper is the US, but the growth outlook for the US remains soft, with industrial production declining to a meagre 0.2% this week while the US housing industry is still struggling to get back on firm footing. That means that investors have turned to emerging markets to take their cues for copper demand. Despite this week's underperformance, many analysts are still bullish on their outlook for copper, with the availability of large copper deposits dwindling and the costs of refining high-grade copper increasing. Investors seeking to take a position in copper should be mindful of the volatility in copper prices, particularly in the current environment where uncertainty is hampering any clear direction for the global economy.

Natural Gas - Commentary 19 Sept 2010

Natural gas has gained steadily over the week, rising 6.69% to trade at $4.02 per million British Thermal Units (MMBTUs) on Thursday morning. Concerns that tropical cyclones in the Gulf of Mexico may hamper gas production supported prices earlier in the week. Tropical Storm Karl may hit wells in the western region of the Gulf of Mexico, while Hurricane Igor is moving towards the Bermuda area with Category 4-force winds. Natural gas has performed horribly over the year as excess supply has suppressed gas prices. Yet there are some bright spots that exist, which should see prices rebound at some point. From an environmental perspective, natural gas emits 30% less CO2 compared to burning petroleum and 45% less CO2 than burning coal. In that respect, gas may benefit as economies push towards more carbon-friendly energy sources and begin to implement stricter carbon capping schemes. Research firm Empa recently conducted a study for the Swiss Federal Office for the Environment where they compared the CO2 emissions from hybrid cars and natural-gas–powered vehicles. They found cars powered by natural gas were better for emissions when driving on motorways, while hybrids performed better for inner-city driving. However, with hybrid technology still in its early stages and gas readily available, a move towards gas-powered vehicles, especially for trucks and buses that travel long distances, could have immediate benefits in reducing CO2 emissions. Demand for liquefied natural gas (LNG) is also set to rise in the long term as Asia and Europe start to see their domestic gas production begins to trail demand. According to gas producer Total, committed natural gas projects account for only 25% of the LNG that these regions will require in 2020. In the short term, demand for natural gas is set to increase as we approach winter and as the need for heating increases during the cooler months

Gold - Commentary On 19 Sept 2010

Gold reached an all-time high of $1274.95 per troy ounce this week as heightened economic uncertainty and quantitative easing speculation encouraged investors to increase their exposure to the precious metal. The US dollar has seen broad declines over the past week and could depreciate further if the Fed announces another round of quantitative easing. The Federal Reserve will meet on 21 September to discuss its policies and a pro–quantitative-easing tone may provide the impetus for further gains in gold. Goldman Sachs chief US economist Jan Hatzius earlier this week reported that further quantitative easing could be initiated as early as November. After the Japanese government intervened to weaken the yen on Wednesday, Japanese investors may seek shelter in gold on fears that further intervention may be on the cards. Gold has also traditionally been thought to be a good hedge against inflation, and with inflation in the UK not budging at 3%, there could be an influx of UK investors buying more bullion. The bullish sentiment was echoed by precious metals researcher GFMS, which hasn't ruled out the possibility of gold rising to $1350 this year as investment demand outstrips jewellery use. Notwithstanding this, demand for gold from the jewellery market is also expected to remain strong leading into the end of the year as gift-giving ahead of various religious festivities props up buying. This week also saw the last major gold miner close out its gold hedging positions. AngloGold Ashanti announced on Tuesday that it plans to raise around $1.5 billion to close out its hedging contracts, which were a major burden for the company as it locked in the price it received for gold at around $450 an ounce. This latest move will allow AngloGold Ashanti to benefit from future price increases in gold. This may be interpreted as a bullish signal as it suggests the miner is confident gold prices will rise further. On the other hand, it could also be considered a bearish move if you take the view that the company is closing out its previous hedge contracts in order to re-hedge at today's prices due to a belief that gold prices have peaked and will decline in the future. However, this seems unlikely as the fundamentals driving gold prices remain firmly intact.