Gold up on record US trade gap: James Moore

The state and health of the US economy was brought swiftly back into focus today as the US trade gap suddenly widened to a record $60.3bn in November, as a fall in exports and rising demand for oil and consumer goods led to the 7.7% increase from October’s record of $56bn.The sharp widening put the dollar into freefall against all the major currencies, triggering an initial knee-jerk 100 plus point drop and further follow on pressure as the Euro rallied from 1.31 to 1.3280 while the Yen climbed from 103.20 to 102.10.

Gold slipped early in the day, drifting to $420.50 on the US open as the Euro came under light profit taking pressure. The bearish data triggered a rapid bounce to $425.50 initially where resistance around the 100-day MA ($425.15) capped the market but the subsequent pressure on the dollar has taken the metal to $427.65.

Silver has added to this week’s gains as a result of today’s data, rising to $6.70 after fixing in London at $6.58. Today’s move has effectively filled in the chart gaps left by last weeks price correction and although the metal might find resistance around 200-day MA $6.675 if the metal closes above $6.65 we could see it push back towards $6.75 and potentially challenge the 100-day MA at $6.95.

Back home in India at MCX, the metal has jumped at Rs6168 per 10 gms from its opening price of Rs6124 and in the evening closed higher at Rs6155, experiencing a rise of 31 rupees.

Sugar shortage unlikely

Cane producers in Brazil expects a good crop in 2005 which is expected approximately 431mn tons, almost 11% more than last year’s 389mn tons. According to Bloomberg, "Despite potential large scale imports from India, the market is unlikely to face a shortage, taking into consideration continuous expansion of sugar production in Brazil". Forecast by International Sugar Association (ISO), it is a much stable condition as far as world produces of sugar are concerned and it might curb out any chances of shortfall for the crop and thereby price hikes. Back home in India, sugar production might drop from 13.8mn tons last year to 12mn tons this year, the consumption average will be around 18mn tons. This eventually will raise concern for importing of 4-5mn tons of sugar to cut any drastic shortfall in the country. India has so far contracted to import 1 mn tons of sugar according to Indian Sugar Mills Association and might opt for 1.5mn to 2mn tons of sugar more in the future.

Rubber to rule firm in coming months

It is witnessed since past that natural rubber prices have begun to decline marginally but unlikely to drop significantly to very low levels according to the market analysts. Since the beginning of January, the RSS (ribbed smoked sheet) four grade has dropped to Rs 52.50 a kg from Rs 54.75 a kg. Price of the RSS-3 grade, comparable with the RSS-4 grade, is hovering around Rs 51.50 a kg in the international markets. According to Prof. K.K. Abraham, President of the Pala Marketing Co-operative Society, "There is now a slight dip only. It is natural in this period and a price crash is not possible." Again, Mr N. Radhakrishnan, President of the Cochin Rubber Merchants Association, said farmers who had stacked their produce in the previous months have now started to sell. "They are now selling since prices are falling in the international markets and on rumors of more rubber imports coming". He is of the view that exports will rise against any further fall in prices. In contrast any likely event of prices rising because of the lean tapping season, tyre makers and other consumers would be enthused to go for imports. So prices are likely to rule steady in the coming days. According to news resources "Exports of natural rubber in the first six months of 2004-05 fell by 34 per cent to 13,243 tonnes from 20,026 tonnes in the same period a year ago. For the full year, exports are likely to be lower than 50,000 tonnes, compared with 76,000 tonnes last year".

Rabi Wheat feels the heat

Wheat is the biggest Rabi crop in India and the crop is feeling adverse pressure in some of the states as the temperature is soaring in some of states growing wheat. It is also well in advance declared by the meteorological department that central India, Maharashtra, Gujarat, and Madhya Pradesh, which are major producers of sugarcane, wheat, oilseeds and pulses, are rain-deficit this winter. Though the agriculture ministry had forecast a wheat output between 76m and 78m tonnes, it is now evident that India will harvest only around 74m tonnes. Last year, the yield was 72m tonnes. According to news agencies, the country as a whole is 10% deficit in winter rain, which is hampering irrigation. In peninsular India, including Andhra Pradesh, Karnataka, Tamilnadu, Kerala and Lakshadweep, which grows groundnuts, sunflower, corn and pulses, rainfall is down by 18%.

Uttar Pradesh, the largest wheat producing state is in safe conditions because of late sowing and in likelihood of temperature dropping in coming weeks will make the crop better as expected. In contrast the other major producing states as Madhya Pradesh, Gujarat and Rajasthan might feel the brunt.

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