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Money CapitalHeight Research Pvt Ltd is a leading Stock Advisory Company, having a strong hold in providing most authentic and accurate Equity Tips as well as Commodity Tips. We are a team of highly qualified and experienced analysts, who deliver their expertise in providing stock market calls for traders which include tips like Stock Tips, Commodity Tips, MCX Tips, Equity Tips and Intraday Tips. All services are provided through SMS and Instant Messenger. Our research is based around these services: • Stock Tips• Commodity Tips• Equity Tips• Intraday Tips• NCDEX Tips For 2 Days Free Trial, please visit our site at http://www.capitalheight.com or please call our 24/7 Customer Care Support us at +91 9993066624, 0731 - 4295 - 950 Or email us at: [email protected]
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www.capitalheight.com
Phone- (0731)4295950
Contents
Introduction
Precious Metals
Gold
Silver
Energy
Crude oil
Natural Gas
LME Metals
Copper
Aluminum
Lead
Zinc
Nickel
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Introduction
Year 2011 has been the most volatile year for the Commodities and Financial markets across
the world as this year was started by hope of a economic recovery and ends with fears of
slipping into Economic recession. In last few decades political environment has never affected
commodities or financial market as 2011 did. European debt crisis and its contagion to EU and
slowdown in global economy and China’s manufacturing PMI slumping down created concerns
for the global investors as they spent 2011 in fears rather than relief.
Commodities was one of the sector that performed with a lot of volatility as Gold, the safe
haven” was giving returns of 35% in 1st half of 2011 suddenly underperformed US treasuries
which gave a return of 16.7% in 2011 as Gold posted its first quarterly loss since 2008. Silver
which made an all time high of $49.76 and was giving returns to investors which was never
imagined, 63.52%, dropped like a knife and underperformed and gave a negative return of -
10.1%. And as we enter in 2012 the precious metals have been into more negative territory as
there 20 DMA dipped below 200 DMA in last week of 2011.
Industrial metals were one of the best performing commodities in 2010 and as 2011 started it
was copper that was supposed to lead the rally but as soon as Tsunami hit the Japan, European
debt crisis bubbled and its contagion to other economies coupled with fears of economic
recession. Industrial, ferrous and non-ferrous metals were the worst performers in 2011 with
Tin and Nickel leading the downtrend with 28.72% and 25% respectively.
Oil space did well in 2011 as there was better demand but supply side risks, geo-political
tensions from Iran, Libya and Sudan coupled with a drop in Dollar led investors to liquidate their
portfolio from precious metals and pump into energies space. Crude oil gave investors a return
of 8.2% while Brent crude edged up 14%. In this report we have summarized the commodities
market and their performance in 2011.
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Gold |31/12/2010 - $1420.3 31/12/2011-$1562.76| Return - 10.2%
Gold started the year as a safe haven as European debt crisis (PIGS) bubbled up and
its contagion to other EU economies and Japan having economic reconstruction lift the
gold t make a fresh all time high of $1920.64, up 35.70%. Gold was seen as a safe
haven as equity markets were underperforming in the time of crisis. The volatility of gold
was higher in 2011 and it technically retraced top Fibonacci extension of its rally from
$250 to $1032 in Mar 2008. Physical gold ETF holdings printed new highs in 2011 to
currently exceed 2300 tonnes. Overall, ETF holdings continued to increase relatively
steadily since their introduction in the early 2000s.
In H2FY11, Gold dropped heavily due to heavy liquidation by hedge funds as they
scrambled for cash to meet client’s requirements and European banks trimmed their
Gold holdings to raise capital, also, US 10 year Treasuries performed better in last
quarter due to which Gold lost its shine as safe haven and trimmed 25% to end 2011
giving a return of 10.20%.
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Silver |31/12/2010-$30.83 31/12/2011-$27.64| Return (-) 9.8%
Silver was the most watched commodities that gave returns of whopping 63.52%,
outperforming every tradable thing in H1FY11 and eclipsed gold in most part of the
year. Silver emerged as the substitute to Gold as it was cheaper for investors to buy it,
also, as leading industrial metals whose demand was seen increasing across the world.
Gold silver ratio which fell to all time low of 32 levels in May 2011 climbed up to 56.13 in
the end. Silver technically slipped down as it formed a Head and Shoulder pattern on
the daily chart and as it broke the neckline at $ 37 saw a fall to $26 levels.
Physical silver ETF holdings have stagnated this year to stand currently just below
17500 tonnes, about 1000 tonnes below their high earlier this year. Speculative
positions in COMEX silver which were at their all time high are approaching 2008 lows,
and are also relatively modest compared to most of the past decade. US mint silver coin
sales fell to a year low in November, in line with developments in the US gold coin
market. Silver posted a loss of 10.2% in 2011 compared to its positive return in 2010.
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Crude oil |31/12/2010-$91.39 31/12/2011-$98.96| Return (-) 8.2%
Crude oil was on one of the best performing commodity in 2011 as it went through a lot
of Geo-political uncertainties, steady demand and supply side risks coupled with a drop
in dollar. Oil prices ended 2011 on a positive note, up 8.2 percent, as a fresh wave of
supply concerns capped a year of unrest and disruptions in North Africa and the
Middle East that overwhelmed concerns about the economic health of large
consuming nations. The supply problems helped lift the price of global benchmark
Brent crude by 13.3 percent on the year to average nearly $111 a barrel for 2011,
eclipsing the previous annual record of nearly $100 struck in 2008 and marking the
third year of annual gains. Crude oil demand according to OPEC, which was
87.81 MB/D in 2011, is expected to edge up to 89.01 in 2012. Crude oil
inventories which were above the level of 330 MB (million barrels) in 2010
declined to 330 MB in 2011 while average (2006-2010) was decreased 320 MB. If the
macroeconomic picture were to turn bullish faster than expected these factors could
quickly drive oil prices above $120/b again.
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Natural Gas |31/12/2010-$91.39 31/12/2011-$98.96| Return (-) 8.2%
Natural gas was the 2nd worst performer tumbling (-) 32.1% this year (Cotton was the
first shredding (-) 36.6%) as it touched to lowest levels since December 2001 at $2.968.
Prolific shale gas wells boosted domestic production and helped sink prices, with U.S.
marketed gas production climbing nearly 7 percent this year to an estimated record high
of about 66 billion cubic feet per day, easily besting the previous all-time high of 62.05
bcfd from 1973. Prices tumbled to their lowest level for any December in the past 10
years, and with no signs of production slowing and no extreme cold weather forecast,
natural gas could fall even further before finding a floor. Mild weather during November
and December has weighed heavily on prices, as winter demand usually runs about 45
percent over summer levels. A host of bearish industry data this year gave the final
push to a market that has been on the defensive since peaking for the year in early
June at just below $5 per mmBtu. EIA total domestic gas inventories fell by 81 bcf to
3.548 trillion cubic feet but at a record high for this time of year. The weekly draw
sharply widened the inventory surplus relative to last year to more than 9 percent and
blew out the surplus to the five-year average to nearly 14 percent.
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Copper |31/12/2010-$9725 31/12/2011-$7530| Return (-) 22.57%
Copper was the best performing commodity in 2010 and was expected the same in
2011 as it ended last year in an upward move and was meant to outperform other
commodities. Copper started the year on a positive note and made a fresh all time high
of 10170 until it was bruised to end the year as worst performing commodity in
2011.Industrial metals were major loser this year with Copper dropping 22.57%
along with other base metals while Tin which doubled in 2010 fell by 28.72%.
COMEX copper trimmed $100 to end the year at $343.35. Over the first eight months of
this year, the copper market deficit totaled 161 kt (vs. production of 12926 kt)
according to the ICSG. Metals were affected by fears over the festering euro zone
crisis and the dollar's resultant strength against the euro. Worries about the possibility
of an economic slowdown in top metals buyer China, and destocking of a
wide variety of metals by that country, also depressed the market.
Chinese manufacturing purchase manager’s index also slipped from the level of 55-56
to 49 in the year end signals subdued demand from world’s largest consumer of metal.
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Aluminum |31/12/2010-$2463 31/12/2011-$1990| Return (-) 19.20%
In metals space, Aluminum was second worst performer in 2011 after copper shredding
19.20% as it was worst hit due to inventories at LME for the whole year were at
higher levels while prices shredded $473 in the international market hit by its
subdued demand in the major consuming economies which were slowed down.
LME Aluminum inventories from second half of 2010 to end of 2011 were
at higher levels. Aluminum inventories were consolidating at comfortable high
level of 450,000 for the past one and a half year near its peak of 470,000
levels. In 2011, aluminum market remained in surplus despite production
cutbacks caused by high cost Chinese marginal producers. Aluminum was
worst hit on report of Chinese economy suffering a downturn
and its major demand which came from European zone was deteriorating for most
part of 2011. Though LME inventories may be at high but SHFE inventories are
witnessing a downtrend and Given the prevalence of expensive, low quality domestic
aluminum smelting, high cost domestic bauxite reserves and power shortages in China,
aluminum imports are likely to increase in coming years.
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Lead |31/12/2010-$2568 31/12/2011-$2009| Return (-) 21.76%
Lead followed copper and ended the year 2011 with a de-growth of (-) 21.76% as the
demand of Lead in the metal industry across globe was subdued for the year with one
of the two major economies like China and European economies signaling negative
demand outlook. The single major factor behind this is the unfolding of the euro zone
crisis, which had some direct and indirect impacts on metals. Another key factor
was the economic slowdown in China. There was a risk of hard landing, and perhaps
the market discounted that. China's factory sector shrank in December as demand
at home and abroad slackened, a purchasing managers' survey during 2011
which fell from level of 55-56 to 49 in December. China accounts for 40 percent of the
world's refined copper consumption. De-stocking in China this year of a wide
variety of metals has surprised market players and analysts, who had forecast
much higher prices for materials such as lead. LME inventories soared to
nearly 400,000 tonnes in 2011 compared to 200,000 levels in 2010.
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Zinc |31/12/2010-$2430 31/12/2011-$1825| Return (-) 24.89%
Zinc was hit hard in 2011 as it was expected to make wave “C” on the monthly chart
after its fall in 2008 from $4633 to $1031 in 2008. Zinc was in a continuous downtrend
tracking metal industry and its slumping demand. Over the first three quarters of 2011
the zinc market surplus was 275 kt (vs. production 9720 kt) according to the ILZSG,
confirming that supply continues to significantly exceed demand. However, with
production costs for most producers in the region just below $2000/t; prices were well
supported provided the growth outlook holds ground. There was a negative divergence
in prices and inventories which came off. As, LME Zinc inventories were in continuous
uptrend for the past four years from the level of 700,000 to 900,000 in 2011 despite Zinc
prices were edging up in 2010 from $1783 to $2586 in 2010. Zinc inventories which
were at lowest levels in 2008 of around 700,000 tonnes saw a continuous rise and
peaked to all time high of 900,000 levels. In 2012, a six month inventory downtrend
following four years of rising inventories, likely a sign of restocking rather than strong
consumption. Over the same period SHFE inventories have also decreased.
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Nickel |31/12/2010-$24835 31/12/2011-$18534| Return (-) 6.1%
Nickel was much less beaten down as compared to other metals such as Copper and
Aluminum and shredded 6.1%. Nickel prices were in a downward trend in 2011 making
lower top and lower bottoms while technically on weekly chart it completed its corrective
wave “C” of its uptrend from $8520 in late 2008 to $29335 in Feb 2011 based on the
weave pattern count. Nickel was beaten down due to negative environment in the global
metal market and economic slowdown in China and European debt crisis. Nickel was
less beaten due to continuous fall in LME nickel inventories as compared to 2010.
Nickel inventories were peaking at 160,000 in 2010 while they slipped to 120,000 in first
half of 2011 and then slipped below 100,000 at the last quarter of 2011 and settled at
90,000 levels in December 2011. With both nickel and iron prices relatively low and
power costs high, Chinese nickel pig iron (NPI) producers are struggling. Due to support
from marginal production costs, lower inventories and decreasing prices so far this year,
we see little further downside risk in the nickel market, absent a serious global
economic setback. Though in 2012, Nickel is likely to continue an uptrend given its
downward trend in inventories which fell by 600,000 tonnes and likely a restocking from
China could also support prices.
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