Gold on the upsurge, silver bullish

Last week was positive for a number of commodities in the world market with price gains in energy, metals and agriculture sector. The US made a significant contribution to boost positive perception of the global commodity market. The flow of positive macro data together with the Fed’s assertion of continuing with the ‘loose money’ policy until 2014 buoyed the sentiment.

The US GDP growth was reported at 2.8 per cent in Q4 2011 at a seasonally adjusted annualised rate, the strongest gain since Q2 2010. Consumer confidence is seen rising. Inflationary pressures appear to be moderating. As for China, the mover and shaker of the world commodity market, December trade data continued to paint a picture of robust commodity demand.

While oil prices buoyed on strong US manufacturing data, base metals gained on encouraging fundamental data trends. The base metals complex has rallied since the beginning of the year smartly, but whether it is sustainable is open to question. Precious metals in particular extended their gains following Fed’s guidance. Platinum beached the $1,600 an ounce mark on supply concerns. With the notable exception of cotton, agriculture commodities too gained with the support of positive external markets.

World steel consumption during 2011 is now estimated slightly above 1,500 million tonnes, suggesting a 6 per cent apparent demand growth. There is expectation that the growth rate may slow down in 2012 to around 4 per cent. It could be low when compared with growth rates of last 15 years, although the 30-year average is 3.1 per cent, an expert report pointed out.

Going forward, steady flow of positive macro data, cautious optimism over resolution of European sovereign debt issue and importantly the guidance from Fed about the monetary policy is sure to improve sentiment and propel prices higher. The US dollar has, in recent days, reversed its firm trend.

A weaker dollar will generally be price positive for many commodities. Investment fund staying in the sidelines are likely to pitch in with improving market sentiment. Yet, it is safe to expect a steady rise in prices driven by both fundamental and non-fundamental factors.

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Posted by admin on Jan 29 2012. Filed under Gold price. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry