Commodities hold positive outlook on DGCX

Despite shedding early gains marginally, Dubai Gold and Dubai Silver futures on Dubai Gold and Commodities Exchange (DGCX) are likely to witness upward movement in the short term.

Owing to favourable market conditions, the first session of the week showed strong opening for the precious metals, which retreated yesterday. Economic conditions with signs of recovery in the global economy continue to drive much of investor interest in commodities including other industrial metals, according to an outlook issued by CPM Group, an independent commodities market research and consulting firm.

"This week petroleum prices may back off following strong increase in the recent weeks," said the CPM report, adding: "Gold and silver prices may show continued strength this week, in contrast, as investors continue to buy these metals in expectation of higher prices over the next few months.

"With increasing indications that the US economy is joining other geographical markets in moving towards recovery and revival, investors are buying a range of commodities, expecting upward pressure on prices. Industrial demand is showing signs of increasing," it said.

Despite marginal drop, gold futures were trading at $1,146.40 an ounce at 6pm yesterday and surpassed previous week's high of $1,139.40. Gold futures on DGCX increased 3.68 per cent and closed the previous week at $1,136.70.

Sajith Kumar PK, CEO of JRG International Brokerage, told Emirates Business: "The strong recovery in physical demand for gold in India, traditionally the world's largest bullion consumer, added fuel to buying binge for the yellow metal. The Bombay Bullion Association lifted its estimate of total 2009 Indian gold imports to 300-350 tonne from a previous estimate of a little over 200 tonne. At the same time, dollar weakness due to renewed economic worries also pushed gold price up."

The dollar declined against 15 of the 16 most-traded currencies on Monday after the news hitting the market that interest rates may remain low for some time.

Gold futures ended higher last week, snapping a five-week losing streak, as the dollar fell sharply after a report showed that US employers unexpectedly cut jobs in December. Fresh new year investment flows also boosted the demand for precious metals.

Another reason for the dollar fall was US Federal Reserve's latest meeting that dampened the market sentiment following the winding down of the central bank's massive purchase of mortgage securities to boost the nascent economic recovery.

"Sustaining above $1,142 is a sign of bullishness, while resistances are $1,154, $1,168, $1,180 and $1,195. Supports are $1,127, $1,119, $1,109, $1,092, and $1,083," said the JRG chief executive.

Silver futures recorded highest gains during the week as Dubai Silver added 9.08 per cent to close the week at $18.50 per ounce indicating weekly high, while the weekly low was $17.165.

"Sustaining above $18.2 is the sign of bullishness. Supports are $17.8, $17.16, $16.70. Resistances are $19.00, $19.48, $20.1 and $21," said Kumar.

The CPM report said: "Industrial users of silver are buying silver in anticipation that its requirements for use in several sectors such as electronics, batteries and solar panels will pick-up sharply as the economy makes its way out of the recession."

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