Mumbai: MCX Gold has declined by 14 per cent from its July highs. Domestic crude oil prices have also followed the same trend; they are down nearly 20 per cent.
Rajini Panicker of Man Financial Commodities gives her take on the fundamentals and how to trade these commodities.
Rajini Panicker expects a rebound in crude prices since OPEC has voiced their opinion that if prices fall below $60, then it is quite a possibility that they might look to cut production.
As a trading call, Panicker would like to pick gold since it is at a very good support level. According to her, gold has a good potential to rally in the next 1-2 weeks.
Exclusive interview with Rajini Panicker:
Q: Is the trend down?
A: No, I think that we should expect a rebound now in crude, primarily because OPEC has voiced their opinion that if prices do fall below $60, then it is quite a possibility that they might look to cut production. That’s why we do not think that prices can trend lower in crude any further. So we think that it is at a crucial support level.
Q: How do you trade crude at this point? The gains have actually gone to negative on a year-to-date basis, will you start going short on this market?
A: It looks like the sell off should be coming to an end. We think concerns that OPEC might cut production could result in at least a stalling of the sell off and there may be a slight rebound from here, especially if there are certain surprises that Iran could bring up, which it is pretty much capable of doing.
Q: What is weighing heaviest on the crude market at this point? The fact that there is a liquidity pull out or the fact that there is not too much by way of demand, what is it that is pulling this market down?
A: There have been downward revisions to demand estimates; natural gas is down. Also the fact that the hurricane season did not result in much adversity, has resulted in an erosion of the 'hurricane premium', which is being weighed down. These are the factors that has kept crude on the downside in the last one month or so.
Q: If we have to choose at this point, as a trading call, across these three commodities between gold, silver and crude, and the base metals, which one would you pick?
A: We would pick gold. We think it is at a very good support level, it has rebounded a couple of times for good support levels. There is good potential for it to rally in the next 1-2 weeks. So as a buy, gold would definitely be the pick.
Q: Domestically what have you been hearing about natural gas and the big disaster that happened with the hedge fund, Amaranth?
A: Natural gas is a difficult thing. At the moment, we tend to stand aside because of the fact that there is a hedge fund that is liquidating positions. So fundamentals could just take a back seat there.
We will just wait and watch how it clears out. But we are looking at crude to rebound. If that happens, then natural gas should find support as well.
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