Atul Shah, Commodities Head, Emkay Global Financial Services talks to Ujjval Jauhari extensively on the outlook of various commodities.

Looking at the continued volatility seen in commodities, what is the general outlook?

Volatility will continue with uncertainty over economy. Safe buying by ETF funds will continue and give good returns.

Last weeks’ economic reports showed U.S. jobless claims hitting a nine-month high. The U.S. regional manufacturing contracted for the first time in a year, reviving fears of double-dip inflation in the world's largest economy. Thus, commodities will remain volatile in such a scenario.

We have seen one good spike in gold prices. What is your outlook on gold and silver?

Investment demand for gold has increased in recent sessions with holdings of the world's largest gold backed exchange-traded fund, the SPDR Gold trust, rising by nearly 13 tonnes last week. This was its biggest one-week climb since June 2010.

The yellow metal has good support at Rs 18,500. In the backdrop of the above mentioned factors, it has bounced to Rs 18,900-19,000 levels. Silver has good support at Rs 28,000 and can go up to Rs 29,500 going ahead. We remain positive on gold and good positions are building in NIMEX and Comex supporting upward movement

What is your advice to investors? What should be their trading strategy?

Investors can look at gold and silver with positive view. In the derivatives segment, one can go with MCX. But they should trade on e-gold and e-silver type of products. There are few advantages. One they can buy in smaller quantities in a few grams and regularly invest. Plus, there are no loading charges.

What is your opinion on crude oil prices?

Crude prices were down for the second straight week, as worries about a stalling recovery grew. The U.S. data has been one strong factor. As of now, there has been no major hurricane activity in the Gulf of Mexico. Thus, people that have positions in anticipation during hurricane season have also started exiting.

The range for crude as of now is between $70-77/bbl. Although according to the inventory data released this week, crude has taken major bashing. We may see some $1-2 uptick in the near-term.

What is your opinion on base metals?

Base metals have been seeing demand concerns. Besides the US data, the Chinese import data for July 2010 was startling. While refined copper imports were down 23.14% and refined zinc imports down 41.26%, primary aluminum and refined lead imports have slumped 97.33% and 76.2%, respectively.

If the trend is to continue, we can see further downside in base metal prices. For now, copper has resistance at $7550 (Rs 347) and prices can fall to $7020 (Rs 328).

Nickel has resistance at $23,000 (Rs 1030) and can go down to $19000 (Rs 875). Zinc faces resistance at $2200 (Rs 100), but prices could fall to $1900 (Rs 88) and for lead, the resistance level is $2,200 (Rs100), and can fall to $1900 (Rs88).