GreatTipsMcx Weekly News-Letter..

WEEK: 06-08-2012 To 11-08-2012

GLOBAL ECONOMIC PERSPECTIVE

Central Banks disappoint and do nothing

Since the beginning of the week, traders have played the central bank guessing game. Currencies and commodities have traded not on fundamentals but on statements, press, rumors and stories about possible intervention from the central banks, ranging from the Bank of Japan, to the US Federal Reserve. The stories have run rampant, with every word interpreted based on the dreams of monetary stimulus.

On Wednesday, the FOMC concluded their 2 day meeting and Mr. Bernanke as always surprised the markets. No one can ever predict what to expect from the Fed’s. The odds markers yesterday were offering 40% that the FOMC would offer some small offering and 65% that the big guns would be rolled out in September. Well, the 40% never happened, outside a negative outlook on the economy the FOMC offered no changes to their current programs and no promises of any future changes except they changed their long term interest side note to extend until the middle of 2014 from the beginning of 2014.

After the FOMC came the Bank of England on Thursday, although traders were hoping for a drop in interest and an addition to the asset buying program, the Bank did not offer any changes to the markets, holding to their original plans. Then after few minutes, Mr. Draghi, to announce his plans for the euro, the interest rate decision was announced saying that the ECB was holding its key lending rate at .75%. Draghi opened his statement saying that EU inflation was well anchored and that growth in the euro area remained weak and that the EU nations must stand together to support and activate the EFSF.

He also stated that the bank may enter into outright market operations when required to keep interest rates and borrowing rates from rising.

Then on Friday, came US Employment report, Demand for higher risk assets helped drive up foreign currencies, commodities and equities on Friday after the U.S. government reported that the economy added 163,000 jobs. This number beat pre-report estimates of 100,000. It can also be perceived as a good sign that perhaps the economy is better than though following three months of sluggishness. The Labor Department also added that the unemployment rate rose to 8.3 percent from 8.2 percent in June. While the jobs number is encouraging, this year’s hiring pace is roughly the same as last year’s

pace of 151,000 jobs a month. The bad news is that this pace is too slow to accommodate the 12.8 million Americans still out of work.

December Gold collapsed when the U.S. Dollar strengthened after Draghi failed to reveal any concrete plans to help struggling Euro Zone nations. Yesterday, the Federal Reserve also weakened gold when it refrained from committing to another round of quantitative easing. Gold failed to follow-through to the upside this week after last week’s breakout to the upside.

Based on the short-term range of $1566.80 to $163, the market is currently testing a retracement zone at $1600 to $1592.

The main trend is up on the daily chart, but this could be threatened if downside pressure continues.

Crude-oil prices gained 1.4% on the week. A higher-than-expected decline in inventories supported prices, but investor optimism was damped earlier in the week by the failure of both the Fed and the European Central Bank to announce the new stimulus measures that some traders had hoped were on their way. Crude-oil futures vaulted almost 5% to close above $91 a barrel after better-than-expected U.S. data fueled hopes that economic strengthening would lead to increased oil demand. Next week Crude oil is expected to trade higher.

BULLION UPDATE

FUNDAMENTAL VIEW

Bullion desk witnessed negative session as much anticipated ECB move failed to restore the investor confidence. COMEX Gold turned down from the Five week high with the 1% weekly loss testing $1600,

while Silver crossed $28 gaining 1.1% week-on-week. At the domestic front Gold lost 1% testing 29850 while Silver remained flat due to Rupee moves.

Eurozone Currency gained for the second week as ECB President signalled the plan to join forces with governments to buy bonds in sufficient quantities to tame the regional debt crisis while admitting that Germany’s Bundesbank has reservations about the plan. Increase in US Nonfarm payrolls, US service industry expansion and unchanged interest rate levels at recently held FOMC eased concern that the world’s largest economy may introduce stimulus but the five month high unemployment rate unexpectedly weakened Dollar index at weekend.

Global Gold ETF holdings increased 0.21% while Silver ETFs added 0.78% silver holdings on weekly basis. Hedge-fund managers and other large speculators’ Net-long positions in Gold rose by 13,087 contracts, or 12%, weekly while there was rise of 4,877 contracts, or 60% in a Net long Position in Silver, from a week earlier. Holdings in exchange-traded products backed by silver jumped to the highest level since May 4, 2011 by being at 18010.28 tons. To sum up it indicates buying opportunity to be taken but proper attention needs

to be given to emerging market economic indicators scheduled next week.

Upcoming week becomes important for industrial metal sector as China and India scheduled to released Industrial production deciding the fate of industrial demands. Precious metals expected to witness choppy sessions due to weaker Euro maintaining selling pressure and lower level prices inducing bottomk fishing. Gold has the resisatnce of $1630 while Silver is expected to test $28.50 breaking which $29.10 can become reality. At the domestic front 30100 becomes a good resistance for Gold a sustained closing above that level may lead it towards 30300 level with the support level of 29800 while 53500 remains a resistance for Silver with the support of 52500.

TECHNICAL VIEW

Looking from the Technical side, precious metals are expected to trade in the positive range but Silver seems more lucrative than Gold due to triangle breakout supported by RSI and Stochastic. Gold breached the triangle pattern in daily chart last week but reverted back indicating a choppy range between $1570 and $1630, either side break out may decide the weekly trend. At the domestic front 29800 and 30100 remain critical levels. Silver maintains the support of $27 and the critical support of $26 with resistance being $28.50 and $29.10. At the domestic front 52500 remains critical support breaking which it may lead towards 51500 level while a close above 53500 may lead it towards 54100 and 54800 which is more likely to take place.

BASE METAL UPDATE

FUNDAMENTAL VIEW

Base metals complex have settled lower on LME as Federal Reserve also disappointed copper bulls by holding to its own previously announced policies rather than taking stronger action, and global manufacturing data this week showed the world industrial economy continues to struggle. While on Friday U.S. nonfarm payrolls rose by a better-than-expected 163,000 last month, but an increase in the jobless rate to 8.3 percent is likely to keep expectations of additional monetary stimulus from the Federal Reserve intact. However Copper prices were still set for their biggest weekly loss in two months after European Central Bank inaction disappointed markets and as worries over global growth dragged on the outlook for metals.

For the coming week will be looking closely at industrial production and retail sales to gauge how well China's real economy performed in July. Fundamentals are not really showing much improvement in the last couple of weeks. Domestic inventories are only slowly declining so it does not really give a lot of support for prices to rally further.

Still, we have to be very alert that copper would likely struggle to hold gains in the weeks ahead unless global growth, particularly in China, shows signs of rushing. Going by the above analysis we may expect prices have limited potential to trade higher further as weak fundamental and overall weak global sentiments.

TECHNICAL VIEW

MCX Copper August futures are trading at 413.5 levels, this week prics ave made a high of 424.7 and unable to sustained at higher levels and prices have made a low of 409.5 levels. This week prices fallen more than 1.50% on MCX. While applying andrew’s pitchfork on weekly chart this week prices have broken the crucial support of 418/419 levels which is lower band and settled below the same levels which suggest that prices may fall further for the comng week.While applying fibonacci extension on weekly chart currently prices have settled near 38.2% levels which is near 413./414 levels.

For the coming week prices have resistance of 421 which is 23.6% fibonacci resistance levels if break this levels prices have next resisitance of 425 levels which is this weks high. While on the lower side prices have more potential to trade further and prices may touch 407/408 levels, once breaches this levels prices may fall further and touch 401/402 levels. While RSI_14 peroid on weekly chart is also treading at 47 levels below 50 which shows that for the coming week prices may fall further in coming week. For the coming week short term trader may use sell at higher levels strategy.

ENERGY UPDATE

FUNDAMENTAL VIEW

Crude oil futures ended above $91 rallied in last trading session on positive US jobmarket report which improved investment sentiment for oil prices. Crude oil prices traded in a narrow range of $88-$90 through out the week on EU debt worries and economic events on US Fed, IMF and EU meeting which failed to cheer markets on lack of details and plan of action. Natural gas futures shed more than 4% fell below $2.9 pressured by bearish inventory data on moderate weather with the end of summer season on lower spot demand.

Tropical Storm Ernesto may develop into a hurricane over the weekend, according to the National Hurricane Center advisory. The storm was moving westward with maximum sustained winds of 50 mph. Platforms in the Gulf of Mexico account for 6.4 % of U.S. gas production.

Price affecting factors for Crude oil

US commercial crude oil inventories fell by 6.52 mb fell to 373.6 mb reporting biggest decline since December 2011.

The risk premium is mounting over oil prices on public unrest in Syria and Iran nuclear issue. The EU and Iranian official failed to set a date for next round of talks and may talk again at the end of the month. Shipments from Iran have plunged by 1.2 mb\day by 52 percent, since the sanctions began July 1 which is costing Iran the loss of $133 million\day.

Proved reserves of U.S. oil and natural gas in 2010 rose by the highest amounts ever recorded. Total US proved reserves of crude oil in 2010 rose by 2.9 billion barrels to 25.2 billion barrels, against the previous high of 1.8 billion barrels in 2009.

Price affecting factors for Natural gas

Natural gas inventories rose by 28 Bcf more than expected to 3.217 Tcf in the week ended July 27 which are now at 14.5% above the five year average of 2.810 Tcf. Natural gas inventories have declined from record levels on seasonal withdrawals and will gradually start to climb with end of summer season from the month end.

Total US proved reserves of wet natural gas in 2010 rose by 33.8 Tcf, 17% higher than the previous record increase of 28.8 Tcf, added in 2009.

Natural gas rigs fell by 7 to 498 to the lowest since July 1999 while horizontal rigs which used to extract oil or gas from shale rose by 3 to 1,155.

The traditional summer ends with July and we expect gradual reduction in cooling demand which may result in higher inventories and lower natural gas prices.

Next Week’s View

Crude oil futures at NYMEX are trading above $91 and we expect oil prices to continue up trend with resistance at $93 and $95. At MCX, crude oil (Aug) has important support at INR 4980 and resistance lies at INR 5150. NYMEX Natural gas has given break down at $2.990 and we expect prices to touch $2.70 and $2.50 in near term. MCX Natural gas (Aug) has important support at INR 156 and resistance at INR 178.

WEEKLY SUPPORT & RESISTANCE

MCX – GOLD – OCT

Recommendation

Buy

Trend

Sideways

Support

28800-28700

Resistance

29050-29250

MCX – SILVER – SEP

Recommendation

Buy

Trend

Up

Support

52500-52000

Resistance

54000-54500

MCX – COPPER – AUG

Recommendation

Sell

Trend

Down

Support

405-400

Resistance

419-425

MCX – NICKEL – AUG

Recommendation

Buy

Trend

Up

Support

865-850

Resistance

890-910

MCX – CRUDE – AUG

Recommendation

Buy

Trend

Up

Support

5025-4975

Resistance

5125-5200

WEEKLY EVENT CALENDER

8-Aug-12

US Consumer Credit 0:30

9-Aug-12

CH Consumer Price Index (YoY) 7:00

CH Producer Price Index (YoY) 7:00

CH Industrial Production (YoY) 11:00

CH Retail Sales (YoY) 11:00

IN Industrial Production YoY 11:00

US Trade Balance 18:00

US Initial Jobless Claims 18:00

US Wholesale Inventories 19:30

10-Aug-12

CH Trade Balance (USD)

CH Exports YoY%

CH Imports YoY%