Archive for December 9th, 2009

Gold prices fall on weak global cues

Due to fresh off-loading by speculators in sync with a weakening global trend, gold futures prices declined by 1.43%.

However, gold for far-month June contract tumbled by 1.43% to Rs 17,320 per ten gram in one lot.

Meanwhile, the metal for delivery in April also declined by 1.08% to 17,282 per ten gram in 186 lots, while February by 1.13% to Rs 17,236 per ten gram in business volume of 6,201 lots.

On the other hand, it is said that fresh off-loading by speculators on account of weakening trend in global markets decreased gold prices at futures market.

Further, gold tumbled by 29.30 dollar to 1128.30 dollar an ounce in New York last night.

CRUDE OIL …. “Can It Continue The Recovery With Same Pace In 2010”

Crude oil, which is the  lifeblood of the economy, has shown stunning recovery in this year as prices have merely doubled from low of $35 to nearly $80. Thanks to the dose of economic stimulus packages which revived the global economy to come out of recession and hence the traders sentiments in crude oil turned in favour of bulls. But the million dollar question is that can crude continue this recovery in medium term. But as of now it seems that the speculative upside and downside rally is over which was seen when it rocked higher toward $147 and then plunged to $35. From here on, the key fundamentals of supply and demand will be the driver of crude prices.

In the year 2009 dollar weakness was the prime reason for the swift rally in crude oil prices. As crude oil is considered as other asset class and massive flow of hedge funds supported the crude oil prices.

Stunning recovery worldwide after a severe recession and the improvement in expected GDP figures by IMF also kept bulls interested.

Now as the global economy is slowing limping back to normal which is suggested by various economic indicators but still the skepticism of pace of recovery is questionable which will further guide the crude movements.

It is important to remember that current pricing on crude oil is influenced by world demand, not just U.S. demand. The Asian economies are improving; China’s economy expanded by 8.9% in the third quarter. Global macro economy will be the key driver of the crude oil prices in times to come.

Crude oil is primarily a transportation fuel. So increase in crude oil usage in transportation will get boost as the global economy continue to recover.

Oil has risen by 79 percent this year on signs that global economy is recovering from its worst recession since World War II, stoking fuel demand amid output cuts by the Organization of Petroleum Exporting Countries.

OPEC countries kingpin Saudi Arabia, also believes that $75 per barrel is a fair price for both consumers and producers. In September meeting, OPEC members said they were content with the direction in which prices were heading. While voicing worries about high oil stock levels globally, they decided to hold production steady and focus on compliance factor with existing production quotas. The lack of production discipline, however, appears to continue. According to latest OPEC report group’s production averaged 26.52 million barrels per day in October, a 50,000 barrel per day increase from September.

Recently OPEC, supplier of about 35 percent of the world’s crude oil, revised its estimate for 2010 global demand growth by 750,000 barrels or 0.9% to 85.07 million barrels a day. OPEC in September agreed to maintain output quotas at 24.845 million barrels per day, will hold its next meeting in Luanda, Angola, on December 22.

The hurricane season in the US has also remained quite in this year as no major hurricane hit the US refineries. Hurricane season generally starts from June 1 and lasts through November.

In a nutshell crude oil will not see one sided movement and will remain volatile in the year 2010. Dollar index has been under lot of pressure in the year 2009, which has given support to the crude oil prices but as the dollar index is expected to show some recovery in first quarter of 2010 that can exert pressure on crude oil prices.

OECD demand of energy is slated to increase in the year 2010 and will give support to the crude prices. China energy demand is also expected to rise in the year 2010 and that will keep the prices supported.

So overall the prices in the next year can remain in the range of $55-85.

Global M&A Deals to Fall 56% in 2009: OECD

Global mergers and acquisitions (M&A) are projected to decline 56% in 2009 compared to last year due to sharp declines in such activities in rich and emerging markets including India.

However, the Organization for Economic Cooperation and Development (OECD) stated that the expected decline in M&A activities this year would be the largest year-on-year decline since 1995.

Meanwhile, the estimate is based on an OECD analysis of data for international M&A activities up to November 26, 2009 where the projected decline is primarily due to a 60% fall in value of cross-border M&A by firms based in the OECD area, to just $454 billion in 2009 from over $1 trillion last year.

Moreover, there has been a decline in M&A activities into and from major emerging economies while International M&A activity by firms based in Brazil, China, India, Indonesia, Russia, and South Africa fell by 62% to $46 billion in 2009 from $121 billion in 2008.

Additionally, it is said that such activities into these countries is anticipated to slide by almost 40% to little over $80 billion in 2009 from just under $140 billion last year while M&A investments have been severely hit by the financial turmoil, which has resulted in tight credit flow.

On the other hand, the latest international investment estimates suggest that total foreign direct investment into the 30 OECD countries will fall to $600 billion in 2009 from a 2008 total of $1.02 trillion.