Monthly View on Commodities - June 2009

Global Commodity

Commodities jumped, capping the biggest monthly rally in 34 years, as the slumping dollar bolstered demand for energy, metals and crops as a hedge against inflation. The US Dollar Index, headed for its sharpest monthly drop this year, lowest level in five months against a basket of six major currencies, fell 5% on speculation that gains in equities and signs of a global economic rebound will spur demand for higher- yielding assets. Precious metals typically move inversely to the US currency. The Reuters/Jefferies CRB Index climbed as much as 13%, the most rally since July 1974, extending to the highest level since Nov. 2008.

As we approach mid-2009, the global economic outlook has shifted from one of pessimism and fear of the unknown to optimism and a feeling that the worst of the financial crisis and global recession may be behind us. The premise for the recovery in base metals prices has been based on very little evidence; however, the fact that Chinese imports of refined metal have exceeded expectations is not based on any real pick-up in consumption, but more on the shifting of surplus metal from one location to another. The main forces behind this have been Chinese consumer and State Reserves Bureau restocking, and the strong arbitrage trade in Copper, Zinc and Aluminum.

Gold and Silver

Gold jumped 9%, most for a month since November and topped $980 an ounce yesterday. Silver had the biggest monthly increase in 22 years and rocketed 30% higher in May on rising economic optimism and firm gold prices. Prices for bullion moved higher as the dollar sank to its lowest level in five months against the euro and the British pound. The dollar has weakened considerably since March as investors move out of cash holdings and into riskier assets like stocks on hopes for an economic recovery. Investors are also worried that the massive amounts of money the government has been pumping into the system could lead to inflation. That has been a boon for commodities like Gold and Oil. Demand for gold tends to rise when the dollar is weak as investors seek protection against inflation, which can be triggered by a falling greenback.

There is an extreme fear that the U.S. economy may lose its AAA credit rating in due course, and this has been feeding the gold bulls pretty well. Things really aren't improving despite the [stock] market's desire to latch on to every little bit of positive news. The reality is the economy is still struggling quite significantly. Gold holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, increased 13.14 metric tons to 1,118.76 metric tons as of May 22

Global gold hedging was unchanged in Q1 2009 from Q4 2008, the first time it had not fallen since Q1 2002. An unusual amount of new project-related hedging and an absence of dehedging from the larger hedgers were behind the stasis. India's gold imports so far in May have been in the range of 10 to 15 tonnes, lower than 29 tonnes imported in all of May of 2008 as high prices have subdued buyers' appetites.

Gold is expected to trade on an upward bias for the next month with resistance of $1000 and may touch new high crossing $1033. This rally would be sustainable if we see some retracement in prices in initial days of the month.

Zinc

Zinc has plenty to gain from the on-going Chinese and US stimulus packages and its price has risen in anticipation. However, industrial activity is about to slacken off even more during the imminent northern hemisphere summer months and this ought to see subdued price volatility, although any further mine closures could offer support. LME zinc stocks have declined, falling to about 10 days worth of consumption, while the three-month price has gained 5% since April to reach $1570/t on 29th May.

Much of the LME stock has been sucked into China to feed state and consumer restocking programmes, which in turn have opened a strong arbitrage trade between the higher Shanghai prices than that of the LME, encouraging further imports. There is little fundamentally in the short-term to keep the price at such a high level, but zinc, more than any other base metal, entered into recessionary territory almost 18 months ago and the amount of mine and smelter production cuts and closures reflects this. It is estimated; about 1.6 Mt of mined zinc production has been cut or closed and 1.4 Mt of refined zinc output in 2009. Importantly, some of the mine closures are likely to be permanent, while others will take time and require financing to restart.

With zinc standing to benefit from the Chinese infrastructure-focused stimulus package more than the other base metals, besides perhaps copper, we expect to see some tightness in the market later in 2009, as some real demand returns. For the next month, we could see some profit booking in the initial days and that would be opportunity to build long position. Zinc is likely to trade higher next month with the resistance $1640 and $1700.

Lead

Lead prices have been in thrall to copper in May, with prices trading wildly in $200/t ranges. LME three-month lead started May at lowest level at $1325/t and ended at highest level of the month at $1570/t. Besides echoing copper, lead’s price strength can be traced to a number of reasons. The normally recession-resistant replacement battery sector, which accounts for about 40% of lead offtake, has benefited from the unusually cold winter in the northern hemisphere.

In addition, it is estimated about 360,000t of lead production has been cut in 2009 due to the severe cuts by zinc miners, as Lead is produced primarily as a by-product from zinc mines. This has tightened the market considerably, leaving LME stocks at no more than three days worth of consumption. Adding to this is the fact that China has become a net importer of lead. In 2007 it exported a net 211,000t, and in 2008 a net 2,700t. In Q1 2009 it imported 48,320t of refined lead, up 826% year-on-year. Also supporting the price was the suspension of US-based Doe Run’s La Oroya lead-zinc-copper smelter in Peru, which produced 114,000t of lead in 2008. It has now restarted, albeit at reduced capacity.

Lead looks the brightest fundamentally of all the base metals besides tin. The low level of LME stocks and tightness in near-term supply will support the price over the next month. For the next month, we could see some profit booking in the initial days and that would be opportunity to build long position. Zinc is likely to trade higher next month with the resistance $1640 and $1700.

Weekly Commentary on Bullion

FUNDAMENTAL COMMENTS AND VIEW

Gold is becoming expensive again after the International Monetary Fund (IMF) warned that the global recession could last longer than expected. Forecasts for the current year are already pessimistic and there are fears 2010 could also be problematic. This might be prompting global investments in gold, which is considered one of the safest avenues of investment in times of economic distress and uncertainty. The International Monetary Fund calculates global losses tied to bad loans and securitized assets may reach $4.1 trillion next year. It estimates banks face further writedowns of $550 billion in the U.S. and $750 billion in the euro area

China Government has declared that it has bought 454 tonnes of Gold for its reserves since 2003 to 2008 and current Gold reserves stand at 1054 tonnes, making it fifth largest Gold reserve in the world. China's gold buying has been rumored for years, but the country stayed quiet so as not to limit its ability to find favorable prices.

The world leader in gold reserves is United States with 8133 tonnes as on September 2008 that accounts for 76.5% of its foreign exchange reserves. Germany has the second highest gold reserves at 3412.6 tonnes while IMF has 3217, France has 2508 tonnes constituting 58.7% of its forex assets. Italy has 2451.8 tonnes constituting 61.9% of forex reserves followed by Switzerland at 1040 constituting 23.8% of total forex reserves. India is way down at 14th position with gold reserves of 357.7 tonnes representing 3% of total forex reseres.

What's really pushing gold higher is India's buying festival and continued jitters about U.S. banks' stress test results. Around 10 tons of gold have already been imported this month. India will import 25 to 30 metric tons of gold in April after no imports in the last two months due to Akshaya Tritya which falls on 27 April 2009.

TECHNICAL VIEW

COMEX Gold has support at $890 and resistance at $920 and $935. Prices took support at 200 DMA at $860 lat week as suggested. And Prices have sustained above $900 to resume its uptrend.
Buy MCX Gold (Jun) above 14700 SL 14500 Tgt 15000

COMEX Silver has support at $12.4 and resistance at $13 and $13.4
Buy MCX Silver (May) above 21250 SL 20800 Tgt 22000

Weekly View on Bullion

FUNDAMENTAL COMMENTS AND VIEW

Gold fell sharply on last Black Monday to touch $865 on back of the news of the UK official at G20 Meeting proposing of the IMF to sell 403 tonnes gold reserves in order to raise cash in G20 Meeting last week. Silver prices also fell Rs 1000 in a single day. But it was overdone and prices started recovering rest of the week due to weak economic data released. US Consumer confidence slipped in March as people fretted about rising job losses and a deepening recession. Federal Reserve officials feared the U.S. economy might fall into a self-reinforcing cycle of rising unemployment and slumping business and consumer spending, making credit tighter in a weak financial system, minutes of the Federal Reserve’s March meeting show

Another round of negative news of US economy was released on Thursday. The number of continuing jobless claims - those drawn by workers collecting benefits for more than one week in the week ended March 28 - surged another 95,000 to 5,840,000, the highest level since the government started keeping track in 1967. Continuing claims have risen 12-straight weeks and are up well over one million since the start of the year. The unemployment rate for workers with unemployment insurance rose 0.1 percentage point to 4.4%, a 26-year high.

According to Gold Survey 2009 released by GFMS Ltd on Tuesday, it revealed, Gold will re-attain the $1000 mark in the coming months and even break the $1,100 barrier. It also stressed that Global gold mine supply contracted by almost 3% in 2008 resulting in production levels falling to a 12-year low and Indonesia output decreased by 35%, South Africa, 14% and Australia 13%.

Demand is likely to pick up in India in coming days to marriage season and festivals coming through and lower prices will attract buying in this counter. Kerala, Assam and some other north-eastern states will celebrate Vishu (Bihu) in a big way on April 14, and that is an auspicious occasion for people to start new things or buy gold. Again, Akshaya Tritiya, India’s two biggest gold-buying festivals along with Dhanteras, falls on April 27 when citizens, especially in the south, are expected to buy gold regardless of price, as they believe it will ensure lasting prosperity.


TECHNICAL VIEW
COMEX Gold has support at $865 and resistance at $890 and $905.
Buy MCX Gold (Jun) above 14450 SL 14200 Tgt 14750

COMEX Silver has support at $12 and resistance at $13
Buy MCX Silver (May) above 20750 SL 20350 Tgt 21150 and 21450

Weekly View on Bullion

FUNDAMENTAL COMMENTS AND VIEW

Gold has long been seen as a haven against inflation and the Fed’s announcement earlier this week that it is to inject more than $1 trillion into the US economy was well-received by markets worldwide but also fuelled fears of inflation down the road, hitting the value of the dollar and also prompting a surge in gold prices. The US Federal Reserve is to embark on quantitative easing by buying up longer-term Treasuries for the first time as part of a $1.15 trillion spending spree with the aim of reviving the American economy out of recession. FED will buy $300bn of US government securities, it plans to buy up to $750bn of additional agency mortgage-backed securities and double the agency debt it plans to buy this year from $100bn to $200bn. Gold prices spiked again on the back of the US's move to massive qualitative easing measures. Greenback weakness and inflation are two of gold’s friends, when it comes to pricing the commodity.

The FOMC’s decision to keep the benchmark rate in a spread between zero and 0.25 percent wasn’t market moving; but the announcement that they would actively pursue quantitative easing was. While policy officials have given considerable forewarning to such a move, it nonetheless raises concern about the health of the US economy and its assets

With gold so hot at the moment—SPDR Gold Trust, the world's largest gold-backed ETF, yesterday reported that having added 335 tonnes of gold so far this year its reserves have hit an all-time high of 1,114.6 tonnes. We continue our bullish stance on Gold and Silver.

TECHNICAL VIEW

COMEX Gold has support at $945 and $930 and resistance at $980 and $1000.
Buy MCX Gold (Apr) if prices sustain above 15550 SL 15350 Tgt 15800

COMEX Silver has support at $13.4 and resistance at $14.1 and $14.6
Buy MCX Silver (May) on dips around 22600 SL 22300 Tgt 23000 and 23300

Weekly View on Bullion

FUNDAMENTAL COMMENTS AND VIEW

The bullion market showed some wild fluctuations during the week. Clearly seeing the narrowest US Trade Balance in six years served to undermine some flight to quality bulls. Gold was battling profit taking by the longs, which might have been somewhat concerned about potential developments from the weekend G20 meeting. With price action choppy the metal may have been underpinned by comments from China's Central Bank warning that the financial crisis may lift gold to record highs. Strong investor flows into gold-backed securities along with currency devaluation concerns may have been other factor providing price support to the metal.

The Swiss franc is one of the traditional safe haven assets, a place where worried investors park money to escape turmoil in other markets. Interest rates are usually low, but Switzerland's conservative fiscal policies and stable economy make it a place where investors attempt to ride out a storm. But the SNB clearly signalled yesterday that it is unwilling to tolerate any further CHF appreciation and acted to sell the currency in the FX markets.

This improves the relative appeal of gold, also a safe haven asset, as it weakens the argument for owning the Swiss franc as an appreciating currency during difficult times. It may also persuade some Swiss-based investors to add to their positions in gold now that the risk of CHF appreciation has been eliminated. Gold did move higher immediately after the SNB intervention yesterday and could benefit further from these moves as investors re-assess their options after this change

China’s Premier Wen Jiabao said he is "worried" about the country’s holdings of US Treasuries and wants assurances that the investment is safe. China is the biggest holder of US debt. Should China or some other significant buyer of US debt announce that they will no longer buy US debt unless denominated in a non-US dollar currency, gold is going to the moon.

The holdings of the SPDR Gold Trust advanced to another record high of 1042 tonnes. The fund now has world's sixth-largest stockpile of gold; overtaking that held by the Swiss National Bank

Technical View

Gold continues to resist any sustained decline, bouncing back quickly from any minor sell off COMEX Gold has support at $900 and $885 and resistance at $965 and $1000.
Buy MCX Gold (Apr) ) if prices sustain above 15450 SL 15200 Tgt 15800

COMEX Silver has support at $12.5 and resistance at $13.5 and $14
Buy MCX Silver (May) ) if prices sustain above 22400 SL 22000 Tgt 22800 and 23000

Weekly View on Bullion

FUNDAMENTAL COMMENTS AND VIEW

Gold has become wealth insurance. Banks are being nationalized as their central banks increase their physical gold reserves. The world financial system is crashing down before us little by little. The fact is we have entered a depression. Close to 14 trillion dollars has been injected into the financial system

The US GDP news released on Friday was the worst since 1982! The economy shrank at an annualized rate of 6.2% in the 4th quarter of 2008 against the expectation of 5.4%. The U.S. dollar index rose as traders now see it as the only fiat currency with safe haven status because they believe the rest of the world is even worse off than the US heading forward.

The rupee hit an all-time low of 51 per dollar on Friday, taking losses this year to 4.5 percent. The currency had fallen 19.1 percent in 2008. The depreciating rupee is support the Indian Gold prices above 15000 Rs / 10 gm. Prices in India have hit record highs over the past few weeks, partly reflecting a sharp depreciation in the value of the rupee that has made dollar-priced gold costlier.

India has not imported any gold so far in February as high prices dampened demand in the world's largest market for the metal and the outlook in the coming weeks remains downbeat. India, which annually buys 500-700 tonnes of gold, had imported 23 tonnes in last February.

According GFMS, there could be major changes in demand pattern in Gold Demand in 2009 with compare to 2008 due to higher prices. Jewellery Demand is expected to fall by 47% from 2146 tonnes to 2000 tonnes. Industrial Demand is expected to fall by 20% in line with current recession from 437 tonnes to 350 tonnes. But Gold ETF Demand is expected to rise more than 100% from 307 tonnes to more than 700 tonnes.

TECHNICAL View
Five day of declines brought gold prices to nearly 9% under last Friday's $1007 peak, and sent speculators wondering about whether the 'correction' label still applies to this week's action. On the other hand, the metal averaged a monthly price in February, which has not been as high since last year's final tally in March.

From the rally of $820 in Jan to $1007 in Feb, Gold prices have corrected and retraced 38.2% to $930 from highs. Prices are expected to bounce back next week. If prices sustain below $930, we could see the levels of $885. COMEX Gold has support at $925 and $900 and resistance at $962 and $977.
Buy MCX Gold (Apr) above 15650 SL 15400 Tgt 16000

COMEX Silver has support at $12.8 and resistance at $13.35 and $13.75
Buy MCX Silver (May) above 22600 SL 21900 Tgt 23200 and 23500

Weekly View on Bullion

Bullion beats all, Gold crosses $1000 mark

Gold hit the magical number of “$1,000” in Friday trading session at the COMEX and immediately registered newswire flashes across the various services. This is only the second time in its history that gold has shot up above the $1,000 level. Generally short-term oriented traders like to book profits when such things occur so it will not be unexpected to see a bit of a pullback from here.

If the market does set back, I do not expect any subsequent price retracement to be very deep this time around. Things have changed since last March 2008 (a year ago), the last time gold was over $1,000. The price rise this time has been measured, it has been steady, and most importantly, it has not been driven by a rush of hot fund money into the market. The open interest is 60% of what it was the last time the price of gold peaked – while there is a sizeable long position in the COMEX gold market, it is well off the levels it reached at that last peak. Also, the reported holdings in the gold ETF, GLD, show that investment money is steadily flowing into this sector. The last time gold was over $1,000 back in March, the reported gold holdings were only 663 tons. As of yesterday, holdings were reported at 1029 tons. Obviously a much larger share of the public is moving into gold. I am hard-pressed to see a reason why all this money would suddenly decide to abandon gold unless of course an economic miracle recovery was to immediately commence.

Panic selling in the equities market pushed April gold above the July high and to the highest price level since March of last year. Ongoing concerns over rising risk to European banks due to their high exposure to eastern European economies added to the safe haven buying in gold. Strong investment buying interest continued to flow to the gold market on rumors that the government may consider nationalizing some banks. A sharp reversal in the dollar during the selling may have provided some additional support. Gold trimmed gains on profit taking after comments by the White House supporting a private US banking system triggered a sharp bounce in equities

The euro reversed an early decline against the dollar on Friday, climbing slightly after the German government's economic stimulus plan cleared its final legislative hurdle and the head of the European Central Bank said money markets had seen improvements. The euro also got support from ECB President Jean-Claude Trichet, who told reporters at the European American Press Club in Paris that money market conditions had "improved tremendously" given the bank's recent actions and "there is no weak link in the euro area," a nod to concern about the fiscal health of Ireland, Portugal, Italy and Spain. The financial situation remains extremely fragile and gold seems to be the only safe haven.

Technical View

COMEX Gold has support at $950 and $980 and resistance at $1010 and $1035.
Buy MCX Gold (Apr) on dips around 15650-15700 SL 15400 Tgt 16000 and 16200

COMEX Silver has support at $13.9 and resistance at $15
Buy MCX Silver (Mar) on dips around 22900-23000 SL 22500 Tgt 24000

Weekly View on Commodity

Bullion

The Labor Department reported the U.S. unemployment rate hit 7.6% in January, the highest since 1982. Economists had expected an unemployment rate of 7.5%. The Federal Reserve has cut its key interest rate to near zero in order to boost the economy, and the Bank of England lowered its benchmark rate to a record low of 1% on Thursday. Gold continues to benefit from destructive monetary policies which are being pursued globally.

Gold holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, gained to a record for the 11th time in more than two weeks, according to figures on the company's Web site. The fund held 867.19 metric tons of bullion as of yesterday, compared with 8.09 tons when it began Nov. 18, 2004.

Hopes rose that the U.S. will pass a stimulus plan quickly after the Labor Department reported Nonfarm payrolls shed 598,000 jobs, the largest amount since 1974. The U.S. stock market rallied Friday amid hopes bad economic news is already priced in, and that the stimulus plan will boost the economy by the end of the year. The U.S. Senate is slated to vote early next week on an economic stimulus package totaling at least $780 billion that President Barack Obama said is needed to prevent the economy from sinking into a deeper recession.

Dubai gold jewellery sales have reportedly crashed in January as high bullion prices and the economic crisis hit tourism arrivals despite heavy promotional activities during the annual Dubai Shopping Festival (DSF) taking place from 15 January-15 February. Sales have crashed by over 60% in January.

COMEX Gold has support at $900 and resistance at $930 and $950.
Buy MCX Gold (Apr) above 14400 SL 14100 Tgt 14650
Sell MCX Gold (Apr) below 14100 SL 14380 Tgt13800

COMEX Silver has support at $12.7 and resistance at $13.8
Buy MCX Silver (Mar) above 20550 SL 20000 Tgt 22200
Sell MCX Silver (Mar) below 20000 SL 20500 Tgt 19500 and 19200

Energy

Downside continues in crude oil with monotonous choppy trading sessions through out the week. Despite poor economic data prices manage to steady above $40 due to significant production cut by OPEC on agreed quota.
The unemployment rate rose to 7.60% at 18 years high in U.S. The jobless number is also lowest since 34 years signaling that the recession in the world’s biggest energy- consuming country is deepening. The OPEC is implementing pledged production cuts and is committed to restoring balance to the market as the spreading recession reduces demand for oil. The Organization of Petroleum Exporting Countries is going to keep oil shipments steady at a five-year low in the next four weeks.
Natural Gas prices continue to trade higher despite lower crude oil prices. Natural Gas prices rose on lower temperature and on speculation that government efforts to boost the economy gas will increase fuel use. Some refiners switch to summer grade product from winter grade expecting demand in summer season as the future contract is trading lower as compare to previous year April contract.
The president Obama’s stimulus package will definitely help to boost the prices but if we look at the world economic condition, the picture is more darken. The recession is getting deepen and more and more countries are coming under effect. The current going “contago” is also a major worry for oil prices as prices are trading around $5 above the current contract. Support for crude oil lies near $37 and $35.

Sell MCX Crude Oil (Feb) below 1930 SL 2030 TGT 1830 & 1810

Weekly Commentary on Bullion

Investment Demand Stampedes
The recent rise in risk aversion has triggered strong inflows into the gold ETFs and a simultaneous increase in demand for gold coins and small investment bars. On December 17th 2008 the combined gold holdings of the World Gold Council gold Exchange Traded Funds and Barclays Gold Trust stood at 985.59 tonnes. By the 16th January 2009 this had risen to 1009.92. By 30th January early in London time they had grown to 1079.83 a growth of almost 70 tonnes in two weeks. To give one perspective, the Central Bank Gold Agreement signatories [European central banks only] sold only 3.5 tonnes in the last two weeks. There are many other gold bullion-holding funds in the developed world from Canada to Switzerland that are not included in this total. If they were the total would be approaching 1200+ tonnes. Clearly we are seeing a stampede of institutional fund management into gold at present.

Central Banks in the Gold Market
The Central Banks of the world are the largest holders of gold in themselves, despite that unquantifiable fact that around 20,000 tonnes of gold are held privately across the Indian sub-continent. So as to give us a sense of proportion on the top cats in the neighborhood, here are the current gold holdings of the top 9 central banks in the world. If we are to take the entire privately held gold Exchange Traded Fund shares they would represent more gold than held by the Swiss National Bank, Switzerland’s central bank. Japan was overtaken a long time ago. Take the world Council gold Exchange Traded Funds and the Gold Trust totals and at the present level of demand the next fortnight will see them overtake Switzerland alone.

Bullion is not in any correlation with Crude Oil and Dollar from last one month. Euro Dollar fell 1.25% during the week and Crude Oil also fell 10% but Gold gained 3% during the week. Silver also followed Gold by rising 5%. This uptrend is likely to continue due to fund buying.

COMEX Gold has support at $900 and resistance at $950 and $990.
Buy MCX Gold (Apr) on dips ~14100 SL 13900 Tgt 14500

COMEX Silver has support at $12 and resistance at $13
Buy MCX Silver (Mar) on dips ~19500 SL 18900 Tgt 20400

Weekly View on Commodities- 27 Jan 2009

Bullion

The precious metal reached record highs in both sterling and euro terms, signaling bullion's strength against not only the U.S. dollar but also currencies across the board. Gold in MCX is also at highest level on closing basis at 14072Rs per 10 gram. Investors are getting out of currencies and getting into gold.

Holdings backing the SPDR Gold Trust, the world's largest gold ETF, climbed 13.15 metric tons Thursday to a record 819.11 tons. Some hedge-related selling from mining companies appeared to occur around $900, but this was overrun by investment demand and buying back of previously sold positions. Flight-to-safety buying combined with technical momentum above the late-December highs enabled gold futures to touch the $900-an-ounce level Friday. Traders cited this throughout the day due to worries about the global economy and financial system. This enabled gold to break above its 200-day moving average early in the day.
Gold is not having consistent correlation with any factor these days like Euro-Dollar, Crude Oil or Equity Market. The Euro lost against the US Dollar for the fourth consecutive week of trade, but a substantial rally from intraweek lows suggests that traders are thus far unwilling to push the Euro/US Dollar even lower. Flare-ups in financial market tensions and well-publicized sovereign debt downgrades of three European Monetary Union member countries were the primary drivers of Euro losses. Indeed, near-universal declines in European equity indices underlined material deterioration in domestic risk sentiment and financial market confidence.

COMEX Gold has support at $850 and resistance at $930.
Buy MCX Gold (Feb) on dips ~14000 SL 13750 Tgt 14400

COMEX Silver has support at $11.30 and resistance at $12.30
Buy MCX Silver (Mar) above19300 SL 18700 Tgt 20000

Energy

Happy Days Are Back !!
The rally of 9% in oil prices gives a surprise to investors despite increasing stockpiles to the record. Crude oil rose to a two-week high $47 on speculation that stockpiles will decline as OPEC implements promised production cuts and investors purchased commodities as an alternative to stocks and bonds.
In earlier trading, oil fell to an intraday low of $41.40 a barrel, pressured by rising inventories and worries about the severity of the global economic downturn. In Europe, Britain's economy contracted at its fastest quarterly pace in nearly 29 years during the final three months of 2008, according to government data. This marked a result even worse than most economists' pessimistic expectations, as gross domestic product shrank by 1.5%. The sharp deterioration in the world economy has led to a steep decline in energy demand and resulted in the recent sharp slide in oil prices.
The Energy Information Administration reported that U.S. crude supplies rose by 6.1 million barrels to stand at 332.7 million barrels during the week ended Jan. 16. The build was much higher than the 1.9 million barrels analysts had expected. The delivery point at Cushing, Okla for oil futures rose 200,000 barrels to reach a record 33.2 million barrels, the government's data showed.
The investment funds are going from treasuries to gold and other commodities as investors look for a safe haven. Treasuries fell; with 30-year bonds heading for the biggest weekly loss in 26 years, on concern that debt sales will increase as the U.S. government boosts spending to ease the deepening economic slump. Selling pressure in dollar and other major currencies may lead the oil prices upward with the cue of gold. The performance of currencies will be the important indicator for price fluctuations.

Buy MCX Crude (Feb) above 2280 SL 2170 TGT 2380 & 2415