Several factors have contributed to the recent strength in energy and metals market prices. Flow of positive economic data (US industrial production and retail sales, China's March data) has signalled improving global demand while renewed expectation of Chinese currency revaluation has provided strong support.
No wonder, energy and metals markets that have strong linkage with growth have buoyed.
However, the market is not without its share of concerns. In the US, the equities market regulator SEC has accused Goldman Sachs of fraud.
What kind of message the development sends to the market remains to be seen. There are also ongoing fears over sovereign debt defaults.
Gold: Prices eased to $1,151.50 an ounce on Friday in London. Physical gold ETP interest remains strong. Total holdings are at a fresh high of over 1,820 tonnes. Recently, speculative flows into Comex positions have turned positive boosting prices. That said, prices are still below their nominal peak of $1,220/oz of late last year.
Investor interest will have to remain robust for prices to stay firm and enjoy an upward thrust.
Whether further highs will be reached and how soon will of course depend on the strength of investor interest and physical demand. Silver prices have tracked gold.
However, if bullion prices were to fall for any reason, silver faces the risk of a substantial downward correction.
GFMS in its recent report expects gold prices to average $1,170/oz in 2010, trading between $1,050 and $1,300. This is of course subject to continued strong investor demand. Whether the external environment will be supportive is the crucial question.
Base metals: Copper finished the week down slightly (2.1 per cent) while nickel and aluminium rose by 0.6 per cent and 1.2 per cent respectively.
On Friday, base metal prices fell possibly in the wake of charges against Goldman Sachs.
Sentiment towards copper has turned decisively bullish. Weak supply-side prospects and positive demand-side signals offer further upward support for copper prices.
Crude: The market has reached a higher trading of $80-90 a barrel. Demand side robust, while inventory overhang has eased.
