Shamik Bhose, Executive Director–Commodities, Microsec Commerze, feels it is a good time to buy gold. “Over here, you should be a buyer with a stop-loss around USD 750-748 per ounce and targeting USD 780 per ounce in the immediate-term. USD 720 per ounce has held as a support zone. One should now see USD 750-720 per ounce range of the recent past, where the market had made some kind of a temporary bottom.” Here is a verbatim transcript of Shamik Bhose’s exclusive interview on CNBC-TV18. Also watch the accompanying video. Q: We have seen a bit of a turnaround in crude. How do you play it now? A: We have seen that over the last three weeks. On two occasions, it has bounced off from USD 61 per barrel, and then around USD 68-70 per barrel, the rally didn’t work. Similarly, we saw earlier this week, it bounced up from USD 54 per barrel to about USD 58.50 per barrel and the oil tanker was hijacked. But then the rally didn’t work out. The critical level is around USD 52 per barrel, which was the January-February 2007 low, and also post-Hurricane Katrina high. I think if it breaks down below USD 52, which is a really oversold, weak, bearish zone, and it is probably a place where some short covering will happen. I think if it can rally above USD 60 per barrel and then above USD 71 per barrel, you will not see any real strength. So, right now I would say it is still bearish. On an intraday basis, it is getting a jump because of the currencies. Q: What kind of a support are you looking at if you sell at these levels? A: If you sell here, keeping a stop-loss above USD 55 per barrel — where in the earlier stage of the week we saw some buying and selling happening — you will be targeting USD 45 per barrel. What has happened over the last three months is: ever since it went down from USD 110 per barrel, it bounced up back from about USD 92 per barrel. But subsequently, every week it has given away USD 5-10 per barrel every week to the short sellers. Any rally has been short-lived, not even a week-long. At times, it [the reduction] has been less than USD 8-10 per barrel. Now it is less than USD 5-6 per barrel. Percentage-wise, it is about 5-10%, but rallies are not holding. Q: How would you play gold? Is it time to buy? A: Yes definitely. We have seen that range established for a fortnight. Today morning, when the dollar was strengthening and crude oil was weakening, gold was beginning to hold its own and rally. Over here, you should be a buyer, with a stop-loss around USD 750-748 per ounce and targeting USD 780 per ounce in the immediate-term. Broadly speaking, USD 720 per ounce has held as a support zone. I think you should now see at the USD 750-720 per ounce range of the recent past; the market has made some kind of a temporary bottom. Q: Do you feel gold can work on its own, and do you expect they can run-up on the higher side? A: I expected gold to go down below USD 700 per ounce. The fact that it has not is attracting some buying. Should gold go up, it will go up on its own steam. There is very little room for any more rate cuts in the US. It is already down to 1%. Any more rates cuts and more stimuli could mean that there is a currency debasement. Eventually, this will lead to dollar weakness and perhaps the gold market is trying to tell us that. Q: How much more would copper and aluminium decline? A: Last week, we thought 5-10%. We’ve already seen that, from there it is bouncing. The two issues here are the LME-certified stocks. Even this week, we have seen aluminium adding 20,000-30,000 tonne, copper adding another 5,000-7,000 tonne. The stocks are coming into LME-certified warehouses because the exchange is the best buyer. As long as stocks keep flowing there, you will find that prices will go down because it is hedged selling. At one stage, I thought copper cannot go down below USD 5,000 per tonne, and I was wrong. Similarly, I thought aluminium would hold USD 2,100 per tonne and I was wrong there too. It has declined 10-11% this week itself. A bounce here is obvious because it is oversold. But the industrial problems, recessionary issues are very much alive in this quarter and the next quarter across the developing and the developed world. So, I would say you would see base metals go down further. Q: How much of a decline do you expect across the board in base metals? A: That is a tough call. Last week, we said 5-10%, and we were right. In some of these metals, you would see the bottom this quarter. But in some of them, you would see in the next quarter. Chances are: copper and aluminium would bottom out in the next quarter, and lead, zinc and nickel, which are below marginal cost of production, may be bottoming out this quarter. But remember some of them are 75-80% down from their highs. So, further down from here is a tricky area. I wouldn’t suggest people to sell unless they are hedging. But I would say it’s difficult here to buy if you are trading in the futures market because the obvious trend is on the downside.

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