Gold

By all accounts, the price of gold should have gone up by now. All governments around the world have pumped in trillions of dollars to stabilise their economies which everybody suspects would lead to inflation and higher prices for gold. Besides, geopolitical factors are not all that favourable around the world from Iran to Pakistan to North Korea.  
But, contrary to an expected sharp rally in gold prices, the yellow metal has actually dropped 2% since February 2009 and is currently trading around $940. Everybody is hoping that it would touch $1,000. But will gold go down before that fooling everybody? If it breaks $900, gold can go all the way down to $800 in the short term. Gold has a history of being extremely volatile.
Why is gold not going up, despite and array of top investors forecasting that it would? This is simply because gold is seen as a hedge against inflation but there is no sign of inflation anywhere. The world’s largest economies are in a deflationary environment. Consumer price index (CPI) has dropped 1.3% in the last year through May – the largest fall in the past 59 years. Therefore, the $1,000 mark will remain insurmountable for a while.

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Iron Ore, NCDEX and FMC

• Iron ore prices touched a four-month high in June following higher demand from China even though a final decision on long-term contract prices remained unresolved between Australian suppliers and Chinese buyers. 

• The National Commodity & Derivatives Exchange (NCDEX) may divest a part of its equity in the NCDEX Spot Exchange (NSPOT), its wholly- owned subsidiary. NSPOT facilitates trade in sugar, pepper, chana, gold and silver and proposes to launch guar seed, bajra, safflower, sunflower seed and oil in the near future. The divestment is intended to raise funds to finance the mandi modernisation project (MMP) of NSPOT. 

• The Forward Markets Commission has allowed commodity exchanges to permit traders to take fresh positions till the date of expiry in futures contracts of some internationally-linked commodities. The move is likely to help better price discovery as these contracts are closely linked to global benchmarks and inability to take fresh positions ahead of expiry often leads to brokers missing out on the hedging opportunity.

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Crude Oil

The Organisation of Petroleum Exporting Countries (OPEC) increased crude oil production by 300,000 barrels per day to 28.39 million barrels per day in May 2009. According to John Kingston, global director at Platts, a leading provider of energy information globally, “with the recent increases in crude oil prices, the drumbeat that we’re on our way back to $100-per-barrel-oil has been growing louder”. However, the surge in output shows that OPEC has a lot of productive capacity that it can bring on the market relatively quickly, and that should certainly prove a hurdle to any move back to three-digit oil prices, feels Kingston. Crude prices have been rising steadily since mid-February and have touched $72 a barrel. The International Energy Agency (IEA) has increased its estimate for oil demand by 120,000 barrels per day to 83.3 million barrels per day in May 2009. Another factor that has been helping crude prices is the increase in China’s industrial output. The Chinese industrial output grew 8.9% in May 2009 compared with the same period last year. Being one of the largest consumers of crude, a higher demand from that countru is likely to keep prices of the commodity on the higher side.

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