Last week's sharp decline in commodities prices may lead to increased buying interest this week, commodities research firm CPM Group said in its report on Dubai Gold and Commodities Exchange (DGCX) released yesterday.
"While a round of profit-taking had been expected to hit prices, especially if prices were not able to break above key resistance levels, prices sold off Friday for a reason that does not support such a downward move. Thus, prices may be expected to spring back this week, as investors reverse last Friday's selling," the Group said.
While gold futures (for expiry in June) volumes slid from 1505 contracts on Monday to 1122 on Thursday at the DGCX, oil volumes at the exchange slid on Friday. Currency volumes have more or less been constant or have increased in the past week.
"Prices will have to hold above key support levels to attract investor fund, but that should not be a problem. Prices for gold, silver and oil had been trending higher over the past several weeks, prior to the sell-off late last week," the CPM Group said.
"Last week's bout of profit-taking also coincided with a strengthening US dollar, further weighing on commodities. While buying interest may be sparked this week, the market remains vulnerable to another sell-off. Fundamentals continue to support prices for gold, silver, and oil," the group said.
"There has been increased optimism in financial markets related to the global economic outlook. An economic recovery is increasing demand for silver from fabricators while demand for oil is rising from consumers and industrial users," the roup added.
WTI oil prices may fall slightly below $82 early this week after prices tested $83 on April 16. The Dubai Mercantile Exchange (DME) settlement price on April 19 stood at $ 82.50 a barrel. "This dip could be seen as a buying opportunity by investors and prices could climb back towards $85 in the later part of the week," the CPM Group said.
Gold prices fell sharply late last week, but could recover this week. The bullion was last prices $ 1128.40 an ounce at the DGCX yesterday.
"Gold prices had been rising overall since late March, but could not forcefully break above $1,160 - $1,170 last week. The lack of follow-through buying as technical resistance levels were tested and an easing of investor interest in gold helped cap price gains," the CPM Group said.
