By Amar Singh, Reena Walia (Angel Broking)

Precious Metals

MAJOR HIGHLIGHTS

- Gold prices ended lower on Friday to close at $1,054/oz
- US Existing Home Sales jump more than forecast in September

MARKET RECAP

Spot Gold prices traded lower last Friday and traded range bound overall as the rally went out of steam. Though the weakness in the dollar persisted, markets found it difficult to pull off higher. In the near term we expect the dollar to witness downside and this factor could support gold prices. Fundamentally, demand has not picked up sharply but factors like economic optimism coupled with a fractured state of the dollar are helping the yellow metal trade higher. The dollar rebounded on Friday and this put pressure on gold prices as the yellow metal is currently taking cues from the movement in the currency market. The dollar gained on Friday as economic data from the UK was bearish and that led to a stronger dollar. But the dollar remains in the downtrend and as long as the dollar remains weak gold prices will continue to trade higher.

OUTLOOK

Interest rates in the US are not expected to rise in the near-term and this could put pressure on the Dollar Index. Until there is no change in the interest rate policy, we expect the dollar to trade lower as a rise in risk appetite is boosting demand for higher-yielding and more riskier investment assets. This has reduced the demand for safe-haven assets like the dollar. Until the dollar trades lower, we expect gold prices to trade with a positive bias. This week, the US is expected to announce data on consumer confidence, manufacturing index, new home sales, unemployment claims, personal spending and personal income this week. If the data comes on the positive side then the dollar could witness further weakness and that could continue to provide upside support to gold prices. Today, there is no economic data from the US.

On intraday basis, Spot Gold prices have immediate support at $1046/$1039 whereas resistance is seen at $1065/$1075. Spot Silver prices shall find support at $17.40/$17.15 whereas resistance is seen at $17.90/$18.18.

Base Metals

MARKET RECAP

The base metals pack made sharp gains in the last week as a weaker dollar coupled with economic optimism helped push prices higher. Rising warehouse inventories in base metals failed to knock Copper and Zinc out of their upward stride. Most metals were trading around multi-month highs, with the complex carried higher by a combination of bullish sentiment, a weaker dollar and steadier equities. Zinc prices gained a whopping 10.5% on the LME last week and raced higher to fresh 17-month peaks as the metals complex continued its broad advance.

Apart from weakness in the dollar, zinc is also being supported by consistently falling inventories as LME stocks have fallen for 16 days in a row. Weakness in the dollar made base metals look attractive for holders of other currencies. Investors continued to dump the US currency, instead placing bets on riskier assets such as shares and commodities, enthused on the whole about a global economic recovery as US earnings season unfolds. In the case of copper, the news of supply constraints is also providing support as wage negotiations in the copper belts of Chile and Peru are now in progress.

Copper prices gained almost 7% on the LME last week and touched a high of $6,686. Copper prices could rise in the near-term as the following factors could fuel the upside - 1) Chinese economic data should support base metal prices, 2) the outlook for base metals is starting to improve significantly as market balances finally begin to tighten and 3) supply disruption at Chilean copper mines will continue to provide support.

OUTLOOK

Our view for base metals remains bullish as demand from developing markets of Asia and South America propped up prices, outweighing declining demand from the West.

On the currency front, we remain bearish over the Dollar Index's short-term prospects and expect this factor is expected to provide upside support to base metal prices. The current corporate earnings season has also buttressed optimism that a global economic recovery is gaining pace; this has been further backed up by suggestions that the economic recovery is exceeding expectations in many regions of the world. Fundamentally, strikes continue to underpin copper as the wage negotiation season unfolds. Overall, the trend in base metals looks up for the near-term and prices could get supported on the back of weakness in the dollar, which makes metals look attractive for holders of other currencies. Economic optimism and better-than-expected corporate earnings results is also supporting the upside.

On the macroeconomic front, the US economy is on the road to recovery which could further boost optimism and lead to higher demand for investment avenues like equities and commodities. Low interest rates will reduce the attractiveness of the dollar and keep the currency under pressure in the near term.

Energy

MAJOR HIGHLIGHTS

Nymex crude oil prices closed above 2.5% higher in the last week China's crude oil imports gained 15% in September

MARKET RECAP

Crude oil prices gained a whopping 2.5% in the last week as a weaker dollar coupled with economic optimism led the commodity higher. However, fundamentally prices do not have much support on the upside as demand has not recovered significantly. Despite a slow recovery in demand prices gained and found support around $80/bbl as a weaker dollar made the commodity look attractive for holders of other currencies. Also, a boost in risk appetite has increased demand for higher-yielding and riskier investment assets.

Though we are witnessing a demand concern on a global front, recent data has indicated that China's crude oil imports gained 15% to 17.2 million metric tons in September as compared to a year earlier. China is a very big oil importer and this factor too could help crude oil prices get support.

Nymex October Natural Gas futures ended in the red on Friday, to close at $5.484/mmbtu.

OUTLOOK

Oil prices could come under pressure today as Nigerian rebels have ended a conflict that has cut output form Africa's biggest oil producer. But a weakness in the dollar could provide downside support to oil prices. Prices could slip below the $80/bbl level today. There is no economic data from the US today and markets will take cues from movement in the currency market.

Today, we could witness sideways move in crude oil prices with support for NYMEX October Crude Oil is seen at $79.40/$78.35 level a resistance at $81.65/$82.20 levels.