Weakness in dollar may see energy, base metals firming up

Tag : base metals

Uncertainty in financial markets will cause extended flight tosafety towards havens like bullion

The markets witnessed a sharp revival in turnover as traderscelebrated the rally in energy and metals-both base and precious.
The week-on-week turnover on the MCX rallied by 25% while themarket-wide open interest rallied by 4%. These are indications ofhigher trader interest and also the possibility of a resource shiftfrom equities to commodities.
The weeks turnover stars were aluminium, crude oil, mentha oil,natural gas, zinc, gold and silver. The open interest gainers werealuminium, gold, silver, mentha and natural gas.
This concentration of trader interest is likely to persist as theuncertainty in the financial markets will see an extended flight tosafety towards havens like bullion, and the weakness in the USgreenback will see energy and base metals firming up further.Temptations to play a contrarian hand and shorting these hardassets must be curtailed.
Agri commodities
Mentha oil has extended its gains as the price appreciation hasbeen significant on a week-on-week basis. The weekly closing hasbeen at its highest since September 20, 2006. This is a bullishindicator. Market internals indicate a 96% increase in turnover anda 43% increase in open interest. We feel at least part profits maybe booked on longs even at current levels as unwinding may be seennear historical highs.
Metals
Aluminium has closed at its weekly highest after May 13, 2006,which is a bullish indicator. That the traded volumes and openinterest have ballooned only add to the positive picture. Whileprofit sales cannot be ruled out for now, the overall undertone islikely to be positive due to the short covering on declines. Marketinternals indicate a 181% increase in turnover and a 47% increasein open interest. Hold longs.