Global commodity markets were battered by unusual volatility past month, driven essentially by worsening global macroeconomic environment. Financial market turmoil and risk aversion was the underlying theme triggered by unresolved European debt crisis. No commodity was spared the ravages of the market as they were all affected to some degree.

The sentiment has turned decidedly negative with little prospect of improvement anytime soon. Indeed, in the short-to-medium term, the most challenging question is whether the world will witness sub-par growth or severe downturn. Unfortunately, no one knows; and that's why is it has become increasingly difficult to forecast commodity prices.

For instance, in the present uncertain conditions, gold ought to have gained from its admittedly popular safe haven status; yet, the precious metal failed to get any boost. If anything, it performed the worst, perhaps. However, such unusual price patterns may not persist for long, according to experts who assert that if the European debt crisis gets worse, precious metals are sure to gain.

But the situation may not be as dark and gloomy as some market prices that have overshot to the down side would suggest. For instance, some experts are raising base metals weighting because of improving market conditions in China. Gold, as a safe haven asset, did not benefit from the current turmoil, but going forward it is most likely to. It is one of the very few stores of value available at present to investors.

Overall, the sentiment is expected to remain fragile and prices choppy. The market is looking for a clear direction. There is a sense that it can't get worse than this. So, in many cases fundamentals will catch up; and markets that have overshot to the downside due to negative sentiment may begin to show signs of improvement. Copper is one such commodity. Leading indicators are being closely watched for telltale signs. So, caution continues to be watchword.

Gold: Precious metals, especially gold and silver, faced further price pressure early last week; but later normalcy returned with prices gaining support following emergence of physical demand mainly from Asia.

On Friday in London, gold PM Fix was $1,652 an ounce, up from the previous day's $1,635/oz. From $1,655.50/oz on October 3, the weekly low of $1,617/oz was reached on October 5 and then prices improved.

Silver, as usual, tagged on to gold. The metal's Friday AM Fix was at $31.98/oz, up from $31.80/oz the previous day. Opening the week at $31.05/oz on October 3, the lowest price Fix of $28.69/oz was recorded on October 5.

According to experts, with the pegging of the Swiss franc, gold was generally expected to benefit as one of the few reliable stores of value left to investors. However, it fell more than 10 per cent since then and recent volatility has prompted some sizeable withdrawals from gold ETPs.

The consolation of course is the support being received from physical demand mainly from Asia. So, prices are likely to be well cushioned amid seasonally strong demand. Of course, the big question in everyone's mind is how soon or when would investor interest return. The global economic backdrop is clearly in gold's favour.

Silver too has benefited from physical demand at the relatively attractive price levels; but the real market driver still remains investor demand. The metal's fundamentals are of course weak as the market is in surplus. So, any upward price movement risks a correction.

According to technical analysts, in the shirt-term, one should look to sell upticks in gold towards 1700 against the 1730 area and look for a move back towards 1580 and ultimately the 1530 lows. Silver's recovery towards the 33.50 range high looks tough, but the 26.08 lows may be targeted. The medium term outlook is bullish.

Base metals: Global growth concerns coupled with Eurozone debt crisis have inflicted price pains on the base metals complex in recent days. The sentiment is decidedly gloomy. However, a closer look at numbers would suggest that the weak demand conditions in Europe and relatively flat performance in North America are more or less balanced by robust demand from Asia, especially China. Indications are that globally stocks are minimal at the consumers' end.

Notwithstanding poor sentiment, copper has the potential to perform given the rising levels of China's spot purchases that have generated some momentum. Supply side constraints due to mine disruptions and falling scrap supplies make the copper market fundamentals constructive; but the sentiment needs to improve.

Currently, aluminium offers a good defensive position as further downside is limited by the current prices that are closer to production costs even as a quarter of world production is losing money at the current prices of $2,250 a tonne, assert experts.

According to technical analysts, near-term basing signals in copper and aluminium confirm the uptick, but given the greater downtrend, the potential for gains towards 7700 and 2270 respectively look faded. A move towards 6500 area in copper and 2090 in aluminium cannot be ruled out. Get set for a bout of range trading.

Crude: Macroeconomic sentient continues to drive daily price movements. The market oscillated between sharp falls and relief rallies. Going forward, the key test for the market will be whether supply will fall faster than demand. While demand has been weakening, will it fall precipitously to offset supply shortfalls? In the sort-term, if some of the idle cash sitting on the sidelines finds its way into the short side of the market, prices could come under further pressure.

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