Market and product

(Commodity Online)Copper prices have rebounded from a low of $8,504 thanks to China demand and industrial demand in India while gold, silver prices continued to gain on dollar weakness that has enhanced the appeal of commodities. Copper, gold, iron ore and coal is expected to lead the commodiites rally over the next two to three years on emerging markets demand, according to Standard Chartered Plc (STAN).

The Standard & Poor’s GSCI Index of 24 raw materials beat stocks, bonds and the dollar for five straight months through April, the longest run in at least 14 years, as investors sought a haven against accelerating inflation. Goldman Sachs Group Inc. said this week it’s turning "more bullish" on raw materials and suggested buying oil, copper and zinc, reversing its call last month to sell commodities.

India’s commodity demand has reached a tipping point and growth is set to accelerate significantly, with metals demand likely to increase 80 percent in the next five years, Barclays Capital said last November.

Coal demand in India may more than triple to 2 billion metric tons in the next two decades as Asia’s second-fastest- growing major economy seeks fuel to generate electricity and run steel and cement plants, according to the government.

Copper
Copper prices have recovered thanks to expectations of rising demand in China where premiums rose to 7-month high. Lower price levels also supported investor interest. Copper futures at London Metal Exchange slumpted to $8504 a ton on March 12 but has subsequently climbed to $9108.25. Shanghai prices have been trading ata a discount compared to London, since July and that discount has narrowed in May. Copper market is now in backwardation suggesting that spot demand is increasing. Stockpiles in LME's Asian warehouses are increasing at a slower rate, climbing 5.4 percent this month, compared with 18.5 percent last month, suggesting exports from China this month will fall from April’s record 44,595 tons,.

At India's Multi-Commodity Exchange of India (MCX), copper June contract rose from Rs 410.50 to Rs 417.70 representing a gain of 1.75% after attaining a high of 419.75. Offlate, industrial demand in India and rising physical copper demand in China have helped in recovery of prices in global markets.

Gold and silver
Gold futures have risen to three-week high thanks to fall in dollar that made commodity investments attractive. US Gold futures for August delivery rose to 1.9% on week to $1,537 after attaining a high of $1,539.50. Bullion priced in euros and British pounds climbed to records this week as European policy makers seek ways to restore investor confidence amid increasing concern that Greece won’t be able to repay its debts after last year’s 110 billion euro ($157 billion) bailout. With Greece debt crisis and lower economic growth, consumer spending in USA, gold safe-haven buying is expected to continue in the near to short term.

Gold June futures at MCX rose from RS 22197 to Rs 22520 representing a gain of 1.4% after attaining a high of 22568 while Silver July futures rose from Rs 53100 to Rs 57505 representing a gain of 8.29% on week. In US markets, Silver futures for July delivery rose 53.3 cents, or 1.4 percent, to $37.863 an ounce. The metal gained 7.9 percent this week. Prices, down 24 percent from a 31-year high of $49.845 on April 25, have still doubled in the past 12 months. The US Mint has stated that its San Francisco facility will start producing American Eagle silver coins to meet rising demnad. The can produce as many as severl hundred thousand coins a week.

Natural Gas
Natural gas prices climbed to the highest price in more than three weeks on forecasts of above- normal temperatures that may boost demand from power plants. At India's MCX, prices reflected global trends and Natgas June contract rose from Rs 196.10 to Rs 205.30 after attaining a high of 207.10.

Natural gas for July delivery rose 15.8 cents to $4.518 per million British thermal units on the New York Mercantile Exchange, the highest settlement price for a contract closest to expiration since May 4 and the biggest percentage gain since April 28.

Nat Gas advanced 3.6 percent after forecasters including MDA EarthSat Weather in Rockville, Maryland, predicted hotter-than- normal weather in the central and eastern U.S. through June 10. Temperatures may be up to 14 degrees above normal in parts of the southern central U.S., according to MDA.

Gas prices are trading near the 61.8 percent Fibonacci retracement level after reaching a 14-week high of $4.729 per million British thermal units on May 2. Some technical traders view this move as a signal that prices will climb. Fibonacci analysis is based on the theory that prices tend to drop or climb by certain percentages after reaching a high or low, Bloomberg reported.

Gas traders were buying back previously sold contracts before the Memorial Day weekend in the U.S.Warm weather can increase demand for air conditioning, sparking demand for gas from power generators. The high temperature in Dallas on June 4 may be 99 degrees Fahrenheit (37 Celsius), 10 above normal, according AccuWeather Inc. in State College, Pennsylvania. The high in New York may be 80 degrees, 4 above normal.

The number of rigs drilling for natural gas in the U.S. rose by 15 this week to 881, according to data from Baker Hughes Inc. Gas rigs climbed for the first time in three weeks and are down 11 percent from the 2010 high of 992. Gas stockpiles rose 105 billion cubic feet in the week ended May 20 to 2.024 trillion cubic feet, the department reported yesterday. The five-year average storage change for the week is an increase of 95 billion cubic feet, department data showed. Supplies were 1.3 percent below the five-year average last week, narrower than a deficit of 1.8 percent the previous week. Storage levels were 10 percent below the level a year earlier compared with 11 percent a week earlier.

Crude Oil
Crude Oil prices gained this week on dollar weakness and after leaders of the Group of Eight said the global economy is strengthening. Crude oil for July delivery rose to $100.59 on New York Mercantile Exchange representing a gain of 0.5% on week. Crude oil prices have risen 35% on year creating a global inflationary situation this is worrying for policy makers. London Brent crude for July settlement fell to $115.03 a barrel on ICE Futures Europe.

Crude Oil June contract rose form rS 4495 to rS 4554 after hitting a high of 4625 at India's MCX.

A report that U.S. consumer spending gained less than forecast in April sent the dollar lower, boosting commodities’ appeal as an alternative investment. Purchases in the U.S. rose 0.4 percent last month as food and fuel prices increased, Commerce Department figures showed today in Washington.

The S&P GSCI index of 24 commodities increased 0.6 percent to 698.72 as natural gas, aluminum and copper surged 2 percent or more. Nineteen of the commodities advanced.

Oil prices also rose amid unrest in the Middle East and as gasoline prices surged because of power outages at Texas City, Texas, refineries owned by BP Plc, Valero Energy Corp. and Marathon Oil Corp. Unrest in MENA region continues to provide support for crude oil. Syria, Yemen continue to face political tensions with protesters clashing with the adminstration.

Meanwhile, Saudi Arabia has indicated that OPEC may be comfortable with $60-70 per barrel of oil as it will discourage nations to go for biofuel or energy saving measures that in the long run weakens the demand for the fossil fuel.

OPEC is likely to increase production quotas to 27 million to 27.5 million barrels a day when it meets June 8 in Vienna to "assuage" pressure on consumer nations to release emergency stockpiles. The International Energy Agency, the Paris-based adviser to 28 nations, has indicated it may tap supplies as unrest in Libya disrupts exports.