Kishore Narne, Senior Vice-President, Head (Commodity & Currency Research), Anand Rathi tells Abhishek Vasudev that he expects gold to test $1,800 in the near term.


Gold climbed to its highest level in almost two months. How do you see this commodity panning out in the near term?

The outcome of last month’s policy meeting of the US Federal Reserve gave a huge boost to gold. The Federal Open Market Committee (FOMC) announced a decision to keep interest rates at near zero till 2014. The move reduced demand for the US dollar, which is seen as an alternative asset to gold, while boosting the yellow metals’ appeal as an inflation hedge.

Gold could build on its rally over the coming days and test levels of $1,768 or even $1,800 is likely, with immediate support seen at $1,700-$1,680 an ounce.

What about silver?

Silver being a speculator’s commodity, has benefited with the recent uptick in risk appetite. Speculative interest in Comex Silver Futures, although low, has seen a pickup in January and was up nearly 70% as compared to December.

The current bullish momentum built towards the end of January should see prices extend towards $35.60 and we have a mild bullish bias until support at $32 holds. Key levels to watch out for in the domestic market would be Rs 58,500 on the higher side and Rs 55,000–54,000 being the near-term support.

Greece might have to follow more austerity measures after the IMF warned that it is the key to avoid economic default. Would this step impact the commodity markets?

Greece's prime minister will call the country's political leaders to seek backing for more austerity after the International Monetary Fund warning. He also said that talks with private creditors on a bond swap deal that is key to the country avoiding an unruly default were "one formal step away." Any optimism that Greece will reach a deal with its creditors would push the euro up and in turn lift commodities as well.

Crude oil prices slipped towards $97 per barrel. How do you see this commodity to pan out given the political tensions in Iran and other West Asian countries?

Crude oil has traded in a broad range recently between key support at $97 and resistance at $102 a barrel. Unless the news from Iran suddenly shifts in either direction, this range is likely to be maintained with a sustained breach on either side likely to decide the near term direction. Iran supply risks could continue to be supportive but a sustained breach of $97 can see selling pressure build towards $92 a barrel.

How will the base metals such as Copper, Aluminum, Nickel and Zinc will pan out in the short-to-medium term?

A hard landing in China is the big fundamental risk for copper as the nation accounted for over 50% of the global demand for most industrial metals.

However, we think that China is unlikely to have a hard landing. Production setbacks due to strikes and declining inventories on LME have been a concern for Copper, which has pushed prices higher. We could see some consolidation and pullback in copper prices over the short term after the rally witnessed recently.

Aluminium is a metal that remains in deficit and will continue to cushion prices as we move forward. Nickel has been supported by supply side concerns over the last month. While the rally can continue over the short term, we do not hold a bullish bias for the same and expect prices to cool off over the medium-term.

What is your take on the agro commodities? Any commodity that you would like to recommend from this pack?

As far as Agro commodities are concerned, we have had good rainfall over the last year and harvesting season is coming to an end. The Rabi crop is also yet to come. It has been a good year for agro commodities and from the lot; Soybean appears to be bearish at the moment. With no fresh export orders for meal, and crush margin being less, there is not much room for crushers to demand
bean.

Arrivals in mustard seed would also be putting some pressure. Soybean prices need to correct from current levels (Rs 2,463 per 100 kg) to Rs 2,360 per 100 kg in order to incentivize the crushers for profitable margin.