COMMODITY WEEKLY COMMENTARY

Most of the commodities finished lower last week on heavy profit booking. Recent bounce back in dollar index compelled commodity traders to quit their long positions. However, some commodities viz., aluminum, nickel and natural gas moved on their own fundamentals and ignored the upside of dollar index. Threat of closure of two mines of Alcoa amid the concern that about three quarters of LME  stockpiles have been tied up by long term financing deals by traders and merchants, raised the premium
on aluminum, sent aluminum prices higher.

Likewise, nickel surged on lower level buying. Rest of the  base metals erased their previous gains to some extent on rise in dollar index amid some negative data.

Gold and silver gave up their previous gain due to the improvement in dollar value. However, recent fall in gold prices brought back smile on consumers face and there is an expectation that import will increase. Negative data, fall in GDP of Japanese economy, higher dollar amid expectation of slower demand of crude in 2010 by EIA hammered crude oil prices and it touched two months low. On the contrary, natural gas jumped on increased seasonal demand. Cold snaps in northwest and Midwest revived the demand of natural gas and it recovered across the bourses, where natural gas is used 72% for heating purpose.

Coming to agro commodities, bears completely dominated all commodities. Selling pressure was witnessed throughout the week. Some short covering in many agro commodities witnessed on Friday.
Less demand from processors amid declining export queries exerted pressure on guar complex. Oil seeds and edible oil complex reacted on improvement in dollar amid new crop estimation by Brazil and Argentina generated selling in futures as well spot market across the board. Fall in crude oil prices gave further pressure on prices. Spices made lower trading range last week. Higher Indian parity, lower export queries in the middle of subdued domestic demand compelled spices to trade low.

Speculative activities in turmeric were on high last week. Throughout the week, December contract traded into upper circuits and April contracts traded moreover on lower side, which increased the gap between contracts to more than 3400 level. Wheat futures cooled down owing to increased supply in spot market. Crushing season of sugarcane has already started which has led to a nonstop decline since last three weeks.

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