Technicals: Gold, Silver, Copper, Crude oil, Natural gas.

Gold (Rs 29,432)

A huge gap-down opening last week keeps the bearish outlook intact for the MCX gold futures contract. There is a strong resistance in Rs 29,880-30,500 zone. Rally to this will be a good opportunity for entering short-positions with a stop-loss at Rs 30,650. However, traders have to be cautious as the market could turn volatile after the US Federal Reserve meeting on Wednesday.

The 200-day moving average at Rs 28,583 will be a crucial support level. Declines below this support can take the price lower to Rs 25,500 over the medium-term. If the contract manages to sustain above the 200-day moving average support, then sideways movement between Rs 28,500 and Rs 30,500 is possible for the next few weeks.

Silver (Rs 44,776)

The corrective rally in the MCX silver contract from the low of Rs 42,418 found resistance at the 200-day moving average (currently at Rs 45,821) last week. The outlook remains bearish.

Traders can continue to hold on to their short positions with a revised stop-loss at Rs 46,300. The contract can fall to Rs 42,400 immediately and then to Rs 41,400. For the medium-term, Rs 41,400 and Rs 40,000 are the crucial support levels which might not be broken in a hurry.

Copper (Rs 461.7)

The MCX copper contract surged 3.5 per cent last week and the outlook has turned bullish. Significant supports are at Rs 456.5 and Rs 451.

Traders can go long now and accumulate on dips to Rs 455 with a stop-loss at Rs 448.

The contract can target Rs 470 immediately and then Rs 510.

The contract’s strong rise from the November low of Rs 428.85 is signalling a reversal of the downtrend that started in September. For the medium-term, Rs 510 will be a critical resistance level for the contract.

Crude oil (Rs 6,034)

The MCX crude oil contract has been continuing its consolidation in Rs 5,750-6,100 range for the seventh consecutive week within its overall downtrend. Traders have to wait for a breakout of this range to enter a trade.

A break above Rs 6,100 can take the contract higher to Rs 6,380. On the other hand, decline below Rs 5,750 can drag the price lower to Rs 5,680 immediately and to Rs 5,500 thereafter.

In the short-term, the probability of the contract breaching Rs 6,100 and moving to Rs 6,380 is higher. However, the medium-term trend is down and a fall to Rs 5,500 looks more likely.

Natural gas (Rs 272.5)

The MCX natural gas contract closed at its medium-term bull channel resistance last week. The price action in the coming week will be crucial to know the direction in the coming weeks. Key resistances are at Rs 276 and at Rs 282.

However, since the contract has risen consistently in the last six weeks, the probability is high for a corrective pull back. Immediate support is at Rs 270. Decline below this support can take the contract lower to Rs 262 and Rs 252. Short-term traders with high risk appetite can go short if the contract declines below Rs 270 with a stop-loss at Rs 277.

Production surplus to keep copper on leash.

Already in surplus this year, global copper output is
 expected to outstrip demand by an even greater margin in 2014. This is likely to keep prices of this key input for the electricity and telecom sectors depressed in the medium-term. Copper is currently trading at $7,054 a tonne on the London Metal Exchange, down 12 per cent since the start of the year.

According to International Copper Study Group estimates, world production of refined copper will exceed demand by about 3.9 lakh tonnes this year, due to the lag in consumption growth vis-à-vis output expansion. In 2014, even though usage is expected to pick up amid the improved global economic environment, the surplus is expected to widen further due to enhanced production from new and existing mines.

Project pipeline

After three years of relatively stagnant production, mine production is estimated to have risen this year by 6.5 per cent to 17.8 million tonnes from 2012 levels. The strong growth is expected to continue in 2014 and 2015 as more mine projects that were deferred or delayed during the financial crisis come on stream. The world mine production is expected to increase to 18.6 mt in 2014. Most of the new production is expected to be in copper concentrate, with only limited electrowinning expansion.

Demand growth

With respect to refined copper production, the ICSG has pegged growth at around 5.5 per cent to 22.1 mt next year. This will be primarily due to the resumption of activities at existing plants and new and expanded capacity at electrolytic plants in China, besides solvent extraction and electrowinning plants in Africa.

Primary refined copper production is tipped to grow by about 7 per cent and secondary production by 2 per cent.

World refined copper demand is expected to have dipped by 0.1 per cent in 2013 to 20.5 mt, the same volume as in 2012. This is mainly on account of lower imports of refined copper by China, even as overall imports of copper inputs rose by 6 per cent due to the Communist country’s strategy of value addition to imports.

Usage in other parts of the world is estimated to have increased by 1 per cent during the year.

The demand situation in 2014 is more optimistic. With better prospects expected for the world economy, consumption is expected to grow by 4.5 per cent in 2014 to 21.4 mt. However, the ICSG has warned that factors such as Euro Zone sovereign debt concerns, political transitions in West Asia and North Africa and production shortfalls due to labour unrest, utility and capital shortages, besides technical factors, could skew its projections.

India impact

Falling prices of copper will benefit India, which is one of the world’s top 20 producers of the base metal, but also one of the largest importers. Copper production in India totalled 7.1 lakh tonnes in 2008, while demand amounted to about 5.5 lakh tonnes, according to a report by the Indian Commodity Exchange. Typically, over 30 per cent of India’s copper demand comes from the telecom sector and 26 per cent from the electrical sector in India. In addition, the building and construction, engineering, transport and consumer durables sectors are major consumers of copper in the country. These sectors stand to benefit the most from lower prices of copper.

GOLDMAN: Here Are 3 Reasons Why The Fed Won't Taper Next Week

A slew of strong better-than-expected economic data has economists increasing the odds that the Federal Reserve will announce the tapering its $85 billion quantitative easing program at the conclusion of its FOMC meeting on Wednesday December 18.

"It's still a close call, but chances are now above 50 percent that the Federal Reserve will modestly reduce its asset purchases later this month," said Potomac Research Group's Greg Valliere who was communicating the analysis of former Fed Vice Chair Don Kohn. "There's a 60-40 chance that the FOMC will decide on Dec. 18 to begin tapering."

However, a December tapering announcement is not the consensus. Most economists don't expect a tapering announcement until January or March.

Goldman Sachs' David Mericle explains three reasons why in a new 9-page note to clients.

1. Economic Data: "...the data since October is mixed at best. The strongest argument in favor is the improvement in the trend rate of payroll growth to the 200k level. However, we expect that Fed officials will also put considerable weight on inflation, which has fallen further in recent months."
2. Communication: "...we continue to expect that tapering will be offset by a strengthening of the forward guidance, but we doubt the FOMC is ready to take this step. While some eventual strengthening or clarifying of the forward guidance is now a consensus expectation, the October minutes and recent Fed commentary suggest little agreement on what form this should take."
3. Expectations: "...while consensus expectations now place greater probability on a December taper, it remains a minority view. We suspect that this makes a move less likely, as Fed officials will be reluctant to deliver a hawkish surprise that could tighten financial conditions and raise doubts about their commitment to the inflation target."

Mericle expects tapering to begin in March, "with January possible as well."

As for the December FOMC meeting: "We expect modest changes to the economic forecasts. In light of recent data, participants will likely mark down their projections of inflation and the unemployment rate and mark up their growth projections slightly," wrote Mericle.

Notable economists forecasting a tapering announcement include Bank of Tokyo-Mitsubishi's Chris Rupkey and Deutsche Bank's Joe LaVorgna.

Weekly Economic Data for the week 07-Dec-13 to 13-Dec-13.

Exp.:	Expected or Anticipated value calculated from the recent survey conducted.
Prior:	Represents the last actual for each indicator. In case there is a revision to the last actual, the prior column reflects the prior figure as revised.
Exp. change today:	Exp. - Prior
Avg. change of last 1 year:	Average Change in Actual data calculated for last 1 year.
Expected impact on price:	This indicator shows the effect of the anticipation of data on the prices of related country’s major indices. We have categorized it as below: Very Good Good Neutral Bad Very Bad
Actual:	Refers to the actual/latest figures after its release.

Data for the week 07-Dec-13 to 13-Dec-13

Date	Time (IST)	Country	Data	Exp.	Prior	Exp. chg today	Avg. chg of last 1 year	Exp. Impact on Price
07-Dec-2013	07-30 AM	Japan	BOJ Governor Kuroda Speaks at the University of Tokyo
08-Dec-2013	09-05 AM	China	Trade Balance	21.700B	31.100B	-9.40
08-Dec-2013	09-06 AM	China	Imports (YoY)	7.2%	7.6%	-0.40%
08-Dec-2013	09-06 AM	China	Exports (YoY)	7.1%	5.6%	1.50%
09-Dec-2013	07-00 AM	China	Consumer Price Index (YoY)	3.1%	3.2%	-0.10%	0.43	Neutral
09-Dec-2013	07-00 AM	China	Producer Price Index (YoY)	-1.5%	-1.5%	0.00%	0.61	Neutral
09-Dec-2013	02-30 PM	Spain	Spain Economy Minister in Brussels for Ecofin
09-Dec-2013	07-30 PM	European Monetary Union	Euro-Area Finance Ministers Meet in Brussels
10-15-Dec-2013	--	China	Money Supply M2 YoY	14.2%	14.3%	-0.10	0.71	Neutral
10-16-Dec-2013	--	India	Exports YoY		13.5%		4.06
10-Dec-2013	11-00 AM	China	Industrial Production (YoY)	10.1%	10.3%	-0.20%	0.67	Neutral
10-Dec-2013	11-00 AM	China	Retail Sales (YoY)	13.2%	13.3%	-0.10%	0.78	Neutral
10-Dec-2013	01-30 PM	European Monetary Union	Euro-Area Finance Ministers Meet in Brussels
10-Dec-2013	03-00 PM	United Kingdom	Industrial Production (MoM)	0.4%	0.9%	-0.50%	1.75	Neutral
10-Dec-2013	05-30 PM	European Monetary Union	ECB President Draghi Speaks in Rome
10-Dec-2013	06-45 PM	United States	World Bank's Kim Speaks About Global Economy in Washington
10-Dec-2013	08-00 PM	United States	U.S. Financial Regulators Meet on Volcker Rule
11-Dec-2013	09-00 PM	United States	EIA Crude Oil Stocks change		-5.585M		3.45
12-Dec-2013	01-30 PM	European Monetary Union	Draghi Speaks in EU Parliament Debate on ECB Policy
12-Dec-2013	02-30 PM	European Monetary Union	ECB Monthly Report
12-Dec-2013	03-30 PM	European Monetary Union	Industrial Production w.d.a. (YoY)	1.1%	1.1%	0.00%	0.59	Neutral
12-Dec-2013	05-30 PM	India	Industrial Output YoY		2%		0.66
12-Dec-2013	07-00 PM	United States	Retail Sales (MoM)	0.6%	0.4%	0.20%	0.63	Neutral
12-Dec-2013	09-00 PM	United States	EIA Natural Gas Storage change		-162B		33.60
13-Dec-2013	07-00 PM	United States	Producer Price Index (YoY)	0.8%	0.3%	0.50%	0.63	Neutral

More pain on cards for gold investors

The domestic market investors have to wake up to the reality of the tapering at least now. Gold prices in India have remained artificially high as rupee lost strength against the dollar.

December 7, 2013:  

Gold prices are taking a hit, thanks to increasing expectation of an imminent tapering. At $1,229.10, the metal was down 2 per cent last week. Silver too dropped and closed at $19.50/ounce.

The surprise from a higher than estimated growth in the US GDP (3.6 per cent versus 2.8 per cent) in the September quarter and the upbeat jobs data hit precious metals. The unemployment rate in fact hit a five-year low at 7 per cent in November.

1st annual drop in 13 years

Gold now stands 27 per cent lower for the year, the first annual drop in the last 13 years.

Investors are rushing to offload their gold investments. SPDR Gold Trust, the world’s largest gold backed exchange traded fund reported its holdings at 835.7 tonnes on Friday, down by 7.5 tonnes for the week. Till date in 2013 investors of this fund have sold 515 tonnes of gold, bringing down the fund’s holding 38 per cent.

In the domestic market too, gold drifted sharply lower. The MCX gold futures contract closed the week at Rs 28,954/10 gram, down 4 per cent. MCX silver ended at Rs 44,052/100 gram, down 0.5 per cent. The loss in these contracts followed gains in the rupee. The currency crawled from 62.8 against the dollar to 61.4 in the last two weeks.

The next two weeks are packed with data releases. From the jobless claims data on Thursday — December 12 — to the crucial Federal Open Market Committee meeting during December 17-18 and the September quarter final GDP numbers on December 20, traders will have to keep a watch on the whole lot of them. It is expected that the US Fed may announce moves to start tapering of its stimulus programme in the coming meet.

The end of the easy money policy in the US would bring more pain to gold as investors move over to bonds and equity. Do not initiate fresh long positions in gold. Existing investors can book profits in the counter and trade with strict stop-loss.

Domestic investors have to wake up to the reality of the tapering at least now. Gold prices in India have remained artificially high as the rupee lost strength against the dollar. But, this may not continue. The sharp decline in CAD and dropping gold imports are positive for the rupee and risks of the rupee inching higher can’t be ruled out.

In the run up to the elections, the expectations of a new reform-centric government at the Centre can help the rupee. From August end, the Indian currency is already up 10 per cent against the greenback.

Levels for traders

Gold is moving towards its June low of $1,180.57/ounce. Once the $1,200-mark is cut, the fall will be swift. Break of June lows can take the metal down to $1,155. On upside, the first resistance is at $1,296.

MCX gold has remained very volatile in the last two weeks giving opportunity for both long and short trades. It first rose to hit the resistance at around Rs 30,900/10 gram levels as indicated and later drifted to close the week near its support at Rs 29,400.

In the next fortnight, the contract may get even more volatile. If rupee remains flat or inches up, MCX gold futures contract (Rs 28,954/10 gram) could slide to Rs 28,741 and Rs 28,321 tracking international prices. If these levels are cut, it can also test Rs 27,248. However, if rupee is weak, it will arrest the fall in the price of the contract and the contract may even strengthen to Rs 29,565 and Rs 30,300.

MCX silver (Rs 44,052/100 gram) continues on a bearish trend and may fall further to Rs 42,121 and Rs 40,765 in the coming weeks. On the upside, resistance is at Rs 45,390 and Rs 47,226.

Technicals: Copper, Natural Gas, Nickel, Zinc, Lead

Copper (Rs 446.3)

MCX copper last week could not gain momentum to breach Rs 450 after its initial rise. The outlook is bearish. Immediate resistance is at Rs 453 and Rs 462. Short-term traders can sell near Rs 450 and accumulate if the contract extends its rise further to Rs 460. Stop-loss can be kept at Rs 465. Immediate support is at Rs 440. Decline below Rs 440 can take the contract lower to Rs 430 where the short-term traders can book profit. The medium-term outlook is also bearish and investors with a medium-term view can hold the short position for a fall to Rs 410.

Natural gas (Rs 253.4)

The MCX natural gas futures contract extended its rally further by 2.7 per cent last week. Although the contract has given up some of its gains, the outlook remains bullish. Immediate support is at Rs 248 and followed by a strong support at Rs 240. Hold on to the long position and accumulate more longs if the contract dips to Rs 248 and Rs 240. Retain the stop-loss at Rs 225 for a target of Rs 270. The contract is moving in a bull channel. The channel resistance at Rs 272 can halt the rally in the contract and can turn the price lower in the medium-term.

Nickel (Rs 844.7)

The MCX nickel contract failed to breach its 200-day moving average (currently at Rs 857) resistance last week. The contract has come off from the high of Rs 862.60 to close on a weaker note last week. The short-term outlook is bearish with significant resistances at Rs 857 and Rs 862. Traders can go short now and accumulate on rallies to Rs 855-860. Stop-loss can be kept at Rs 868 for a target of Rs 810. The medium-term trend is also down as long as the contract trades below Rs 900. Key support is at Rs 800, decline below which can drag the price lower to Rs 730 over the medium-term.

Zinc (Rs 115.75)

The 21-week moving average, currently at Rs 117.7 has restricted the MCX zinc contract from moving up for the second consecutive week. An intra-week bounce to Rs 117 in the coming week will be a good opportunity for taking short positions with a stop-loss at Rs 118.2. Though there is a support near Rs 114, the contract may fall to Rs 112 in the coming weeks where profits can be booked. The short-term view will remain bearish as long as the contract trades below Rs 121 for a fall to Rs 108. However, the medium-term trend is up with a strong support at Rs 105. Some fresh buying here can reverse the short-term downtrend.

Lead (Rs 127.4)

The MCX lead futures contract is coming down over the last four weeks. The outlook is bearish with resistances at Rs 129 and Rs 132. Rally to these resistances if seen in the coming week will be a good opportunity to enter short position with a stop-loss at Rs 133. Although the 200-day moving average support is near Rs 125, the contract looks weak for a fall to Rs 118 in the short-term. However, the medium-term outlook is bullish with a strong trend support near Rs 115.

The Best And Worst Performing Assets From November.

Global monetary policy continued to drive financial markets in November as Japanese stocks rallied almost 10 percent on the month as the country continued to try to inflate its way out of stagnant growth, while gold and silver led decliners as Western quantitative easing showed no signs of ending.