MUMBAI: Commodity counters stayed depressed through the session as the dollar gathered more strength against the basket of currencies, particularly the euro. Concerns over financial crises pushed the euro lower against the dollar. As we know, a stronger dollar cuts commodities’ inflation hedge appeal. The price decline was sharpest on the gold counter, which suffered after Reserve Bank of India (RBI) increased repo and reverse repo rates on Friday. Since the RBI’s decision, gold prices have lost nearly 3% to trade near a one-week low.
Expectedly today's session so far saw a further decline in commodity prices. US crude oil futures fell over 1% to trade below $80 a barrel. NYMEX crude for April delivery, which expires at the end of the day, fell 86 cents to $79.82 a barrel, its third consecutive fall as the market again balked at breaking above $83.
Spot gold was at $1,104.00 an ounce, down $2.2 from Friday's late price, which had dropped around 2% on the day. US gold futures for April delivery on the COMEX division of the NYMEX stood at $1,104.70 an ounce, down $2.90.
Gold found some support from an unexpected quarter. Markets expect that the yuan could become a reserve currency accounting for at least 5% of global foreign-exchange reserves as early as 2025, central bankers said in an annual global survey. This could mean some pressure on the dollar and, hence, the yellow metal recovering some of the losses. Japanese markets are closed for a national holiday.
Base metal counters continued to trend lower as the strength in the dollar cut metals investment appeal. Shanghai copper is seen trading lower, tracking a decline in London copper prices in the previous session. Three-month copper on the London Metal Exchange (LME) fell $51 to close to $7,435 a tonne on Friday, but recovered to $7,445 in after-hour trading. LME copper last stood at $7,364 a tonne, down $86.
LME copper retreated on a stronger dollar and mounting concerns about the debt crisis, while a 9% weekly jump in Shanghai's copper stocks added to worries about demand from the world's largest copper consumer. But metals consumption in China will continue to drive demand for years, despite tightening credit, according to Société Générale.
On the supply side, Grupo said on Friday its copper mining subsidiary Southern Copper Corp had closed its copper smelter in San Luis Potosi, which had an annual capacity of 230,000 tonne. Copper scrap shipments to may fall in April as a new customs rule to fight duty evasion takes effect and demand falls as the government tries to cool a construction boom, industry sources said on Friday.
Domestic commodity counters extended losses tracking overseas markets. However, the rupee surrendering to the dollar's strength prevented a sharp decline in commodity prices. Yet, the market sentiments remain depressed as little element found supporting commodity counters. Gold extended fall to hit one-week low on the London spot market. Apparently, gold futures experienced further selling as bears seized the opportunity.
Gold maintained subdued moves since morning. There is no change in gold's behaviour as of now. MCX Gold for April settlement contract last quoted at Rs 16,385 per 10 grams after moving between Rs 16,515 and Rs 16,345 per 10 gram. MCX Silver May settlement contract traded 1.4% lower at Rs 26,230 per kg, after having opened the session at Rs 27,540.
Crude oil counter continued to trended lower. MCX crude oil futures for April settlement moved between Rs 3,680 and Rs 3,612 before retracing to current level of Rs 3,622 per barrel. Crude oil prices are sliding ever since it hit a high of $83 early last week.
Base metal counters extended fall tracking decline in the overseas markets. Weak cues from Shanghai have dampened trading sentiments on the metal counters. MCX copper for April settlement was last quoting 1.6% lower at Rs 334.20 per kg, after opening the session at Rs 339.20. MCX zinc March contract lost over 2% to trade at Rs 101.25 per kg.
