Commodity Outlook for the Week, Gold and Silver Look Bearish

Last week MCX Gold Feb future witnessed overall bearish movement of more than one percent and made a low of 27382 during the week. Gold bearishness seen on international cues as the Federal Reserve painted a bullish view of the U.S. economy after its first policy meeting and it may raise interest rates as early as June, that dimmed the appeal of non-interest yielding assets such as gold, also supported by various economical events released by United State were indicating bullish sentiment of economy.

COMEX Gold future prices sustained below the psychological level of $1,300 for entire week with overall loss of more than 2 percent on concern over a looming increase in U.S. interest rates. There were also more signs of strength were last week in the U.S. economy as data showed the number of Americans filing new claims for unemployment benefits tumbled to its lowest level in nearly 15 years by  36,000 to 265,000 from estimates of 301,000, greater than expected New Home Sales  to 481K from 452K and also positive CB Consumer Confidence released last week supported the Gold prices to trade downside. Bullion has lost more than 2 percent last week but it was still up around 6.5 percent for January, which keeps it on track for largest monthly gain since February 2014 after touching a high of $1,306.20 last week. Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust  rose by 16.72 metric tonnes to 758.37 metric tonnes till Thursday with overall gain of  2.25 percent on week on week basis. 

Silver tracked the trend of gold and witnessed bearish movement last week. MCX Silver sustained below 39800 for the entire week and showed bearish movement from higher level with overall loss of around 6 percent on weekly basis. COMEX Silver also tumbled and sustained below its resistance level of $18.30.

India revised its economic growth to 6.9 percent from 4.7 percent for the fiscal year 2013-14 on Friday after the government changed the formula to measure the economic growth. The government also revised its GDP for 2012/13 to 5.1 percent from 4.5 percent earlier. Indian Government revises the method of calculating national accounts and other macro data every five years, bringing in a newer base year. It will now use 2011/12 as the new base year, instead of 2004/05. 

On expectation that government will cut import duty in the upcoming Budget, Indian jewellers are offering discounts to customers. They expect that government may cut the import duty from the current 10 per cent in the upcoming budget. As per the data released by the government on Thursday, the trade deficit fell to its 10 months low of $9.4 billion in December. This is giving hope to gold importers about the cut in import duty. India's Finance Minister Arun Jaitley is likely to present the budget on February 28 for the 2015/16 fiscal year.

This week, we can expect Bearish movement in Gold MCX Feb futures & it can test the levels of 27100 - 26900 till the end of week. Similarly Silver is also looking bearish on the charts and MCX Silver March futures can test the levels of 36800-36300 on the lower side.

For this week, major U.S. data ISM Manufacturing PMI, ADP Non-Farm Employment Change, ISM Non-Manufacturing PMI, Trade Balance, Unemployment Claims, Non-Farm Employment Change and Unemployment Rate coupled with physical demand in Asian region will further provide direction to the bullions. 

CapitalVia market reviews and stocks for the week

Market Overview: Last week saw the market give significant gap up opening and continue its positive momentum on the first trading session of the week after India and the US reached an understanding on resolving the logjam in implementing the India-US nuclear deal. profit booking was observed on the last day of weekly trading session which was led by heavy selling in PSU banks like SBI, Bank of Baroda, Oriental Bank, Union Bank etc. 

On Monday the market have opened on a negative note tracking mixed signals and weak performance from global market. the Asian peers  and SGX Nifty have opened weak. The US market have shown growth concerns with the Q4 gdp coming at 2.6% vs the expected 3.3%. 

Last week saw the market give significant gap up opening and continue its positive momentum on the first trading session of the week after India and the US reached an understanding on resolving the logjam in implementing the India-US nuclear deal. profit booking was observed on the last day of weekly trading session which was led by heavy selling in PSU banks like SBI, Bank of Baroda, Oriental Bank, Union Bank etc. 

On Monday the market have opened on a negative note tracking mixed signals and weak performance from global market. the Asian peers  and SGX Nifty have opened weak. The US market have shown growth concerns with the Q4 gdp coming at 2.6% vs the expected 3.3%.

On Monday the data for Chinese PMI have come in which raised concerns on health of Chinese Economy and hurts Indian Interests as FII have tended to keep emerging market in same basket. The PMI final HSBC/Markit Purchasing Managers' Index (PMI) for January came in at 49.7 on a seasonally adjusted basis, just below the 50.0 level that separates growth from contraction. 

The mood is as expected on a wait and watch policy lines, with eyes on RBI bi-monthly rate to be announced tomorrow, Raguram surprised the market, with his his borrowing rate cut in January, and a liquidity starved market would be hoping for a similar miracle tomorrow. 

For Today Bank stocks are among the major losers with several key stocks in this space extending previous session's losses. Metal stocks are also mostly lower. Capital goods, realty, oil, power and FMCG stocks are mostly flat. Healthcare, automobile and information technology stocks are finding modest support. 

 

Upcoming Events:

#    Sixth bimonthly monetary policy review by RBI on 3rd February will be important event to watch in near term. RBI is expected to keep its main lending rate unchanged.

#    HSBC India Manufacturing Purchasing Managers' Index (PMI) for January 2015 is due on 2 February 2015.

 

Stock Recommendation:

BUY MTNL IN NSE CASH ABOVE 30,SL 28, TGT 32/34

It is trading below the falling trend line and is facing resistance at the level of 30, the stock is managing to trade above its 50 and 200 days moving averages with the RSI of 59. It is likely to show an uprally with the breakout of the level of 30 where it may test the level of 32 if it manages to sustain above the level of 28.

 

BUY DHFL IN NSE CASH ABOVE 495,SL 465, TGT 525/550

The stock is forming a continuation pattern near its 52 week high and is sustaining above its 200 days moving averages with the RSI of 60. It is likely to surge with the crossing of its resistance mark of 495, if it continues to sustain above the support level of 465. Traders can keep the targets of 525 and 550 in the stock.

 

BUY ONGC IN NSE CASH ABOVE 359 , SL 342,TGT 376/390

After a corrective phase, stock is accumulating on daily charts below the level of 359. The stock is trading with the RSI of 52 and is likely to show recovery with the crossing of the resistance mark. One may initiate the long position in the stock above the level of 359 for the targets of 376. Immediate support of 342 can be placed as stop loss in it.

Commodity review and market for this week

Last week MCX Gold Feb future witnessed bullish movement of more than 1.5 percent and made the high of 28271 during the week. Bullish movement in Gold seen mainly due to buying by jewellers to meet wedding season demand and firming overseas trend. Economic and political uncertainties in the euro zone also pushed euro-denominated gold up to a peak level of 1,126.85 euros, highest since May 2013. 

COMEX Gold future prices breached the psychological level $1,300 an ounce on Wednesday for the first time since August-2014 due to softer dollar, uncertainty over global economy and hopes of stimulus measures from the European Central Bank (ECB) which fuelled demand of bullions. Traders and investors were curious about the ECB policy meeting on Thursday, as it was widely expected by bank to unveil a quantitative easing (QE) programme. As expected, European Central Bank expanded stimulus measures, the bank will buy roughly 50 billion euros of government bonds a month from March until September 2016. Major US economical events released last week like Individuals filing for initial jobless benefit which is increased by 6,000 to 307,000 from estimates of 301,000 and lower than expected Building Permits to 1.03M from 1.06M also supported the Gold prices to trade upside. Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, expanded 1.55 per cent to the highest level since Oct. 29 at 742.24 tonnes on Tuesday. 

Silver tracked the trend of gold and witnessed bullish movement last week. MCX Silver sustained above 39000 for the entire week and showed bullish movement from lower levels with overall gain of around 2.8 percent on weekly basis. COMEX Silver also rebound from lower levels and sustained above its support level of $17.50. 

Commerce and Industry Minister, Nirmala Sitharaman, hinted that Government of India may provide some incentives to the jewellery sector in the upcoming budget. Jewellery industry is one of the most highlighted focusing areas for “Make in India” drive. In pre-Union Budget recommendations, All India Gems and Jewellery Trade Federation (GJF) had urged the government to cut the duty on gold from 10% to 2% to encourage ‘Make in India’ initiative in the gems & jewellery sector. GJF also categorically urged the government to exclude jewellery from all bilateral or multi-lateral free trade agreements (FTAs) buy stating that the government should not encourage jewellery imports at cheaper rates, as it discourage indigenous jewellery manufacturing. Jewellers also want Jewellery manufacturing cluster to be revamped by including common facility centre and skill up-gradation. 

This week, we can expect bullish movement in Gold MCX Feb futures & it can test the levels of 28500 – 28800 till the end of week. Similarly Silver is also looking bullish on the charts and MCX Silver March futures can test the levels of 41000 – 41500 on the higher side. 

For this week, major U.S. like data Core Durable Goods Orders, CB Consumer Confidence, New Home Sales, Unemployment Claims and Advance GDP, coupled with physical demand in Asian region will further provide direction to the bullions.

Market Review and Outlook for the Week

Market Review:

Nifty Jan Future series gave opening on positive note this week and crossed its previous all time high of 8668 in mid of the week and market zoomed after the announcement of bond buying program of worth 60 billion Euros per month by ECB on meeting held on Thursday, 22nd January. European Central Bank would start monetary stimulus from this March until the end of September 2016. Among the emerging markets, India is likely to get the benefit of this stimulus in the form of foreign fund inflow.

Strong quarter three numbers from the blue chip companies, recent rate cuts by RBI added fuel to the investors sentiments and Nifty Future made a life time high of 8875.85 on last day of week and surged 298.95 points more than three and half percent to close at 8834.00.

Market likely to continue its up-trend with the positive bias in near term as overall health of the market is positive. Nifty future having support at the level of 8700 with the breach of this some correction can be seen while on upper side it has resistance at the level of 8900.

 

Current Market: 

This holiday shortened week could see triggers like volatility on Wednesday because of F&O contracts expiry on Thursday, markets have opened on a flat note already, on Wednesday tracking weak global cues as Wall Street went down 1% on account of disappointing earnings report from Industry bellwether like Microsoft showing a disappointing quarter. Another major happening for the week has been anti-austerity Syriza party in Greece polls winning, the presidential election on 25th Jan 2015,  this had the potential of wreaking havoc on finance markets but as Indian markets were closed on account of Republic day, we managed to avoid that. Greece has been a challenge for financial market as the markets are still haunted by the shadows of 2008 globalization crisis. 

When the market opened on Tuesday, market was buoyant with the Obama visit to India, and the market did not disappoint to extend a welcome. Sensex closes at 29,571.00 up 292.20 (1.00%) points, NIFTY closes at 8,910.50 up 74.90 (0.85%)

Market will also have a keen key on FOMC (Federal Open Market Committee) meeting on Tuesday and Wednesday, its first meet for the year 2015, any announcement may have an impact as market opens on Thursday and details from the meeting start coming out by tonight, Wednesday. 

 

Upcoming Events:

·        ·One should trade cautiously ahead of the expiry of derivative contracts in next week, as market may remain volatile.

·         Quarter three result of companies viz. IDFC, Oriental Bank, Titan, Union Bank, Karnataka Bank, Idea Cellular, Ranbaxy, Havells is scheduled to be declared next week.

·        ·Auto companies start unveiling monthly sales volume data for January 2014 from 1 February 2015.

·         FOMC (Federal Open Market Committee) will review monetary policy at a two day meeting on Tuesday, 27th and 28th January,2015.

 

Commodity Outlook for the week

Precious metal: Gold prices traded higher on Friday, but gains were expected to remain limited as data on U.S. initial jobless claims released on Thursday pointed to an ongoing recovery in the labour market. Strong data could also prompt the Fed to increase interest rates sooner rather than later, hurting non-interest-bearing bullion. However, minutes from the Fed's latest policy meeting released on Wednesday indicated that the central bank was in no hurry to raise interest rates. 

Over all, MCX Gold February future is in consolidation and sustaining on lower levels from the last week. For the coming week 26500/26200 will act as a major support whereas 27500/27900 will act as a major resistance level in MCX Gold February future. For the next week in MCX Gold, traders can use buy on lower level strategy, if MCX Gold February future sustains above the levels of 27100 then it could test the levels 27300/27500.

Technically, MCX Silver March futures is in consolidation and sustaining on lower levels. So for the coming week 39800/41000 will act as a major resistance levels where as 36000/34700 will act as major support in MCX Silver March futures. For the next week in MCX Silver futures, traders can use buy on lower level strategy, if MCX Silver March futures sustains above 37300 then it could test the levels of 38500/39800. 

 

Energy:- 

Oil prices headed for a seventh straight weekly loss on Friday, with key producers showing no sign of cutting output in the face of a global supply glut. 

U.S Crude futures for February delivery were down 12 cents at $48.67 a barrel despite robust U.S. Economic data that brightened the outlook for demand. Supply concerns remained as Saudi Arabia and its Gulf OPEC allies are showing no sign of considering cutting output to boost oil prices even as demand slows globally.

For the coming week 2700/2500 will act as major supports levels whereas 3200/3500 will act as a major resistance in MCX Crude oil January futures. For the next week, trader can use sell on higher level strategy, if MCX Crude January future sustain below 2980 levels then it could test the levels 2850/2700. 

 

Base Metal:- 

Copper slumped to 20-month low on Friday on subdued demand following weaker than expected economic data from China and Germany and on higher inventories of the metal, Prices fell on weak demand after China's producer price index in December month plunged to five year low its lowest since September 2009. Other metals prices also supported on expectations of upbeat US non-farm payroll data which will boost sentiment of improving labour market in the world's biggest economy. 

Growth in the labour market of the country could prompt the Federal Reserve of United States to raise rates sooner than expectation. Investors are hoping higher rates could improve demand of the base metals, in the world's biggest economy. 

Trend of MCX Copper February future is in consolidation and sustaining in range. So for the coming week 398/420 will act as a major resistance levels where as 350/332 will act as major support in MCX Copper. For the next week trader may follow sell on higher levels strategy, if MCX Copper February future sustain below 377 levels then it could test the level of 365/350.