Naveen Mathur, Associate Director (Commodities & Currencies), Angel Broking spoke to Puneet Wadhwa on commodities outlook.


China's economy grew at its weakest pace in two-and-a-half years in the latest quarter. What is the likely impact on the global commodity markets, especially base metals?

Although economic growth in China has slowed down, the news brought in a positive factor for the global financial markets as this slow growth is expected to trigger an easy monetary policy in the world’s fastest growing economy.

Since the release of news that China’s fourth-quarter GDP rose at a pace of below 9 percent, hopes have led to a revival in general global market sentiments as markets expect a reversal in monetary policy.

We expect the impact of the same to be positive for overall commodities but base metals will benefit the most. Lower interest rates would translate into increase in demand for raw materials in general, thus providing a sense of relief to the commodity markets amid the grim economic scenario.

How do you see the prices of copper panning out?

We feel that the red metal is poised for upside in the short-term on account of an expected easy monetary policy in China. Recent developments of the International Monetary Fund proposing an extension of their lending limits will also be supportive. If the bullish tone continues in the first-quarter then, copper prices could test levels of Rs 437 – Rs 469/kg.

There have been some changes in the import duty structure of gold and silver in India. Was this on expected lines? What is your near-term outlook on these two precious metals?

The move has come in at a time when the Indian economy is grappling with economic slowdown and this introduction would help increase government revenue if imports sustain.

Although a direct fundamental impact on consumer demand for gold should be negative, we feel that markets would factor in the same and consumers would return to the jewellery market once the scenario stabilises.

We expect gold and silver prices are expected to be driven by risk sentiments in the global markets. In the near-term, however, the market sentiment is expected to remain buoyant on account of expectations of an easing monetary policy in China coupled with the latest development of the International Monetary Fund planning to boost its lending capacity.

From a quarterly perspective, gold prices on the MCX are expected to take support at Rs 25,620 - 23,950 per 10 gram and face resistance at Rs 29,230 - 31,140 per 10 gm. For the same period, silver prices on the MCX are expected to take support at Rs 46,844 - 42,660 per kg and face resistance at Rs 56,080 - 62,660 per kg.

How do you see the crude oil prices panning out in the next three months given the current developments across the Euro-zone, Iran and US crude inventories?

In the short-term, crude oil prices are expected to trade with a positive bias on growing concerns of potential supply disruptions from Iran. Along with that, another positive factor for the short-term is the expectation of lower borrowing costs in China, the world’s second-largest energy consuming nation.

In the next three months, prices on the MCX could test levels of Rs 5,900 – 6,500/bbl, as supply concerns, dollar weakness and an improving US economic scenario will support upside.

Lower availability, along with renewed demand from abroad, has been fuelling mentha oil prices for six months, reports suggest. Do you expect this trend to continue?

The prices are expected to continue its upward trend as the fresh arrivals are slated to commence only in the month of June, sowing of which commences by mid of February. Currently, with diminishing inventories prices are expected to strengthen in the coming days. We expect the prices to find support at Rs 1,320 – 1,420 levels and on the higher resistance could be seen at Rs 1,600 – 1,750 levels.

What is your near-term outlook for the Rupee? What are the key events that are likely to govern its movement?

In the near-term, we expect the Rupee to appreciate as hopes of an improvement in the global economic scenario backed by various factors like lending by the IMF, China’s expected easy monetary policy, positive risk sentiments and dollar weakness. We expect it to take support at 49.75 and face resistance at 52.00 in the near-term against the USD.