COMMODITY

Commodity trading is nothing but trading in commodity derivatives (futures or options). In other words, if you are keen at taking a buy/sell position based on the future performance of commodities like gold, silver, agricultural commodities, metals, crude etc; then you could do so by trading in commodity derivatives.

Commodity derivatives are traded at the commodity exchanges. There are currently 2 major commodity exchanges NCDEX (National Commodity and Derivative Exchange) and MCX (Multi-Commodity Exchange). Gold, Silver, Agri-commodities including grains, pulses, spices, oils and oilseeds, mentha oil, metals and crude are some of the commodities that the exchanges deal in..

Gold  : Gold has been weak for more than last 15 days. Heavy sell off, stronger dollar due to fear of US interest rate hike and bearish technical indicators helped the yellow metal to remain on the lower side. Higher prices also resulted into low physical demand globally. Prices are likely to go further down if internationally spot prices can breach $600. However, any weakness in dollar can trigger some recovery.

Silver  : Silver prices too maintained the weakness for quite sometime. The bears got the hold of the market due to improvement in the dollar, bull liquidation and sharp fall in other base metals. Price movement remained highly range bound with a weak undertone. Closing below $11 should trigger further selling. However, any recovery in the base metals may lend support to silver prices also.

Crude oil  : Crude oil prices remained volatile for the last few days. After going up to $72 in the US market prices fell due to indications that tension between Iran and West may cool down. Adding to this, surprising increase in US energy stock and killing of Al Qaeda leader Musab Al-Zarqawi also help the crude prices to ease. However, prices should again gain momentum due to continuous global tensions and positive sign from the technical indicators.

Pulses  : All major pulses in 2006-07 are in bullish phase. Times to time one or other factors are responding differently to take prices in any direction. Chana, which has appreciated by 60 to 70 per cent over previous years, continue to run in northward direction. Trading corporation of Pakistan issued tender for supply of Chana (approx. 1 lakh tones) has lead to jitter in the market and spot price even reached to Rs 2485 per quintal at Lawrence Road (New Delhi). Such big quantity will have an impact during days to come. Meanwhile, abolishing of import duty (10 %) on pulse has cause a check in speculative run. Facts of empty pipeline of Chana and Urad are non supportive of bearish move. Effects of reduction of import duty are felt more pronounced in Tur and Masoor.

Chane, Urad, Tur & Masoor :

Factors	Impact
Tender of TCP (Pakistan)	Bullish if Indian Trader have to deliver	Bearish if competitive countries get
Lesser Arrival in Mandi	Bullish arrivals decline in mandi	Bearish if liquidity in mandi increased
Monsoon (South West)	Bullish if good monsoon along with fair distribution happen	Bearish if weakening or uneven in producing belt happen
Govt. Intervention to check price		Bearish if certain restriction is imposed

Spices  : Spices are known for their flavor and if preparation is of Indian originative taste a bit too spicy. On the price front majority of the spices are in range bound trading after having good run in upside direction this year giving better return to farmers. Exception to this is Jeera and Pepper. These to spices operate in lower side mainly due to high inventories with exchange-designated warehouse along with poor quality. Over the last few years due to inability to export in international market happen due to non-competitive price, stocks pilled up has build up with private entrepreneur. On the other hand price of spices like Red Chili (70 - 80 %) and Turmeric (15-20 %) has appreciated significantly over previous year owing to damage cause due to excessive as well as deficient rainfall giving good realization to farmers. This may lead to better acreage this year.

Red Chili, Turmeric, Black Pepper, Jeera  :

Factors	Impact
Export Order Import	Bullish	Bearish Bearish if more import under SAFTA or other agreement happen
Warehouse Stock	Bullish if less stocks	Bearish if more liquid stocks
Quality Concern		Bearish if poor quality with warehouse
Rainfall Distribution	Bullish if Uneven	Bearish if even with normal monsoon
Lesser Arrival in Mandi	Bullish arrivals decline in mandi	Bearish if liquidity in mandi increased