The research, written by CPM
Group, argues that high US inventories, profit-taking and tepid
investor sentiment will weigh on the price. Supply disruptions
in the Gulf of Mexico due to tropical storms may push the price
above $80 or even $82 this week, but the gain may be
The most important background
for commodities is the economic outlook in developed countries,
as demand in developing nations remains strong. As the forecast
for Europe and Japan has brightened, offsetting slower growth
in the US, most commodities have rallied. But while investors
expect economic activity to pick up in Europe over the next
months, they remain concerned over its fragility.
Insecurity pushes gold
and silver up
CPM expects gold and silver
prices to benefit from continuing concerns over financial and
The roll of the futures
contracts in the New York market may help keep gold above
$1,180 an ounce, but it should not be surprising if prices fall
below this level later this week or in August, warns CPM.
Combined exchange-traded fund
gold holdings were 65.41m ounces on July 22, down 415,000
ounces from the end of the previous week, but 8.71m ounces
higher than at the beginning of the year.
Silver is likely to receive
stronger support in the medium to longer term as demand
improves, CPM believes. Recovering gold prices have helped lift
silver prices, and investors took advantage of relatively low
prices last week.
Combined exchange-traded silver
holdings grew to 487.2m ounces by July22, up 472,000 from the
end of the previous week.
Euro recovers on US
CPM expects the euro to be
capped at $1.31 this week, after an 8% appreciation. Investor
sentiment has shifted away from concerns over sovereign debt
and deficit problems in the euro zone, and focused more
strongly on slower US growth pospects.
The stress test results of
European banks may cause another sentiment shift, cautions CPM,
but it expects broad consolidation in the euro to continue
The Indian rupee may trade
between $2.12 and $2.14 per 100 rupees this week, forecasts
CPM. The rupee fell toward $2.10 at the beginning of last week,
its lowest level since May 25.
Foreign fund net outflows from
India’s debt market stood at $139m on July 21
– the largest daily withdrawal since June 29. Foreign
investment in India’s domestic markets remains
elevated, however, as concerns over inflation have eased and
investor sentiment toward India’s economic growth
prospects has improved. CPM thus believes the rupee could
appreciate in the medium to longer term.
Pound likely to move
CPM expects the pound to trade on either side of $1.55
this week. Higher than expected public borrowing pushed the
pound down, but a strong June in the retail sector and good
second quarter GDP numbers helped it recover. Gains may remain
capped at $1.56 and the pound is likely to trade sideways,
forecasts CPM. However, as investors become more confident in
the UK’s economic recovery, the pound should stay
above $1.53 in the near term, it reckons.
Yen benefits from safe
The yen trended higher due to concerns over sovereign debt
problems in Europe and CPM expects it to hold above 1.14 cents
this week. This trend is further bolstered by the weak US
outlook, pushing the yen up to seven month highs last week.
Government officials have expressed their willingness to stem a
strengthening yen and conduct further economic stimulus.
Mareen Goebel +44 207 779 8358