Spot Gold prices gained yet again on 2nd consecutive day as the dollar traded sideways in today’s trading session. Movement in the dollar is crucial for the yellow metal as appreciation in the currency would bring down the prices of gold & vice-versa. Gold prices were up more than 1% compared to its previous close around 5 pm on MCX today. Copper prices gained marginally today amidst some positive economic data from the US and China. Inventories of copper on the LME decreased by 2375 tonnes to 541150 tonnes today. Earlier, the inventory on the LME was on the rise which was exerting pressure on the prices. The US Manufacturing PMI Index which rose to a six year high of 58.4 was better than expected, Eurozone economic figures also provided support to commodities. We may see an increase in demand in metals due to a boost in manufacturing sector in US, China and the Euro zone. However, the gains in the metal prices may be capped by restriction lending of banks in China in the short run, which may bring the down the demand for the metals and pushing the prices down. China is the largest consumer of base metals and hence any change in the country’s activities has a significant effect on the prices. Further, Obama’s budget forecast of $1.6 trillion deficit for 2010 may create negative sentiments and can exert pressure on the prices of commodities. Nickel prices were in the green after falling for two earlier sessions after the temporary settlement to avoid strike among the employees at the Xstrata Sudbury Operations. Crude Oil opened yet again in the positive territory today. Positive economic figures from US and Eurozone helped the prices rise. US has shown good economic figures since last week and being the largest consumer of energy, could support prices. The Chinese car sales have also jumped up which would help the prices to gain further. The IMF prediction of 3.9% GDP growth of global economy is another sign of demand increasing in the future.. However, again the prices may be capped by Chinese restriction as it is the second largest country after US in the consumption of energy. Outlook The Pending Home Sales data to be released later today is an important watch would be crucial. The previous figures of this index were negative, but the forecasts today are at 0.4%. If the numbers are positive, we may see demand picking up. Overall, if the dollar strengthens again, there may be pressure on prices of commodities. Gold prices will take cues from the movement in the dollar and economic announcements.

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