Following the record investments in gold exchange traded funds (ETF) on Akshaya Tritiya (May 6th), the National Stock Exchange (NSE) is in for further promotion of gold investment option.

According to NSE, the volume of investment in gold ETFs have more than doubled in the past one year and on Akshaya Tritiya day, the NSE recorded a high volume of 423.05 cr in GOLD ETFs as against RS 172 cr recorded on May 16th, 2010. On May 6, nearly 80,000 investors have participated in gold ETF’s as against 41,000 investors on Akshaya Tritiya last year. The numbers of gold ETF units traded were nearly 20 lakhs, while last year on Akshaya Tritiya it was a little over 10.5 lakhs.

Statistics show that the assets under management for Gold ETFs stand at Rs. 4,400 cr. as on March 2011, a 176% rise since March 2010, when it was 1590 crores. Launch of new fund offers and a rise in value of vold have led to quadrupling of assets under managements (AUM) of gold ETFs in the past one year.AUMs rose to Rs 4,800 crore as on April 30, 2011, up 180% from a year ago when they were at Rs 1,171 crore even as gold jumped 33% to Rs 22,937 a tola (10 gram) during the same period.

Two new gold savings schemes were launched during the period under review -- Reliance Gold Savings Scheme, which mopped up Rs 141 crore, and Kotak Gold Savings Scheme, which attracted inflows of a little over Rs 5 crore.

Both these schemes invest into ETFs run by Reliance and Kotal mutual funds and contributed to net inflows into the funds. The gold schemes are in addition to the 10 gold ETFs, including the likes of Benchmark Gold ETF with AUM of Rs 1703.49 crore as on April 30, 2011, UTI Gold ETF (Rs 497.65 crore) and Reliance Gold ETF (Rs 434.38 crore).

Gold demand has been boosted by a weak dollar and worsening sovereign debt of some Eurozone members as investors the world over flock to hard assets like bullion to protect themselves from the falling value of paper money.

Gold ETF’s offer 99.5 % purity, high transparency because they are traded on the exchange platform and low costs of trading to the investor an investor can invest in very small amounts and physical delivery is possible for units equivalent to a kg of gold and above. Gold ETF’s are also attractive for high networth individuals, who can buy gold units equal to a kg of gold or more and take physical delivery of high quality gold. At the same time, they are assured that they are paying low costs for buying and selling the units.

The disadvantage of a gold ETF is the tracking error, where the fund's net asset value might not accurately reflect the movement of the underlying asset. The tracking error arises out of cash held by ETF and expenses charged on managing the fund.

Net inflows into the ETFs almost trebled to Rs 919 crore during January- April from a year ago, according to Association of Mutual Funds of India. Average gold price in Mumbai rose by 25% to Rs 20,937 a tola over the comparative period, exceeding returns from the Sensex, which generated a negative 11%, and fixed deposits of 9-9.5% by miles.

Copper futures at global markets rose on Friday on a firm euro, while trading remained thin ahead of a long weekend in U.S. and Britain.

Tracking global cues copper futures at India’s Multi Commodities Exchange are also trading on a higher note.

Copper June contract is trading at Rs. 414.30 per Kg, up by 0.30 percent at 11:50 IST.

The contract traded at a high of Rs. 414.90 per Kg and a low of Rs. 413.20 per Kg for the time being. Volume traded is 11153 kg so far and open interest is 19908 lots as of now.

Three-month copper on the London Metal Exchange rose 0.8 percent to $9,094.50 a tonne by 0352 GMT, after closing 0.5 percent lower in the previous session.                

Prices were on track for a 2.8 percent drop this month, its third straight monthly loss.  

The most-active August copper contract on the Shanghai Futures Exchange SCFcv1 edged down 0.1 percent to 68,000 Yuan per tonne, also headed for a third consecutive monthly drop.

 

Indian domestic steel prices recorded marginal increases in May. However, there is growing resistance amongst consumers regarding any additional advances in selling values. 

According to MEPS International, purchasing activity has been quite slow during the last few weeks. Inventories are being run down ahead of the monsoon season and no large orders have been placed. As such, mills are facing difficulties due to steel price hikes. Also, lower raw material expenditure is likely to exert downward price pressure in the short term.

The demand from the construction and infrastructure segments has been weaker due to price hike. The prices of steel are expected to be fairly stable in June and then fall, modestly, over the summer period.

Chile is all set to the be the world’s first to sign the International Type III environmental production declaration (EPD) reporting system for its domestic copper industry, reported the country’s mining and metallurgical research centre (CIMM).

The country has signed the declaration with a view to standardize the production indicators of the copper market to compare the products with that of its international counterparts. CIMM officials added that the step will help differentiate copper products of Chile due to its environmental impact certificate.

The international ISO 14025 standards defines the EPD as a quantum of data pertaining to the environmental aspects of the product in addition to the already set criteria based on the ISO 14040 and the environmental information.

The CIMM project will determine Project Category Rules (PCR) for products like copper concentrates, cathodes and wires, said the officials. PCRs proves absolutely indispensible for environmental and climate declarations.

The PCRs, once set, after the international community’s review, the EPDs will be set for Chilean copper products, which in turn will be used to raise the environmental standards of the companies buying products from Chile.

World’s largest steel consumer China said its crude steel production may start to drop in June because of an impending power shortage.

According to China Iron and Steel Association, crude steel production peaked at the moment as it hit a record of nearly 1.95 million tons in the first 10 days of May.

China is facing serious power shortages over the summer, with the State Grid Corp anticipating a capacity gap of 30 to 40 gigawatts.

Thousands of small mills will face the challenge of power shortages because the government will first guarantee electricity to residential users.

The government is limiting power supplies in southern China. Hunan Valin Steel Co Ltd and smaller mills reported output reductions because of local power shortages.

However, in northern China, Hebei Iron & Steel Group and Shandong Iron & Steel Group have not yet reported reduced output.

Last year's mandatory power cuts to meet energy-saving targets forced small steel producers in Hebei province to cut output or close mills.

Steel prices remained flat for a week, with rebar costing 4,940 yuan ($760) a ton on the Shanghai spot market, unchanged since May 17, according to the consultancy Mysteel.

Electricity shortage will affect the whole industry chain including raw material producers, possibly pushing up the prices of raw materials and steel products.

Xicheng Steel increased its price for deformed steel bar by 20 yuan a ton on Monday, while Handan Steel increased its price by 30 yuan a ton.

Prices remained stagnant at most steel mills, however. The cost rises for steel products mainly involve construction plates, as the downstream of steel plates including the car industry remained sluggish.

The Indian steel producer JSW Steel Ltd said higher raw material prices are likely to keep margins under pressure during the quarter which started in June. Coking coal prices have increased to an average $330 a ton in March from $225 in January. Iron ore prices have risen by $50 a ton compared with last year.

Indian ore with an iron content of 63.5 percent was being offered at $183 to $186 a ton including freight on Thursday and Friday, the industry consultancy Umetal said.

According to data from the National Development and Reform Commission, Operating costs for Chinese steelmakers rose 17 percent to 30.1 billion yuan in the first quarter. The price of steel products increased 17 percent while the price of iron ore rose 40 percent, squeezing the companies' profits.

Rally in gold and silver continued this week as the hunt for safety savoured both the metals. Worries about the ability of Europe's currency union to manage members' sovereign debt has sent investors looking for a refuge into gold recently.

GOLD futures have been ending higher on demand for safe-haven assets, while silver climbed by more than 4% as the metal continued to rebound after its recent lows.

Futures had slipped from late-April highs above $US49 a troy ounce down to as low as $US32 an ounce, as Comex raised the cost of holding contracts and many commodities fell. 

The most actively traded gold contract, for June delivery, is up $3 at $ 1530 per ounce on the Comex division of the New York Mercantile Exchange. 

MCX Gold futures are trading very thinly today. The June contract is up just Rs 13 at Rs 22514 per 10 grams. The commodity needs to break the range of Rs 22540- 22470 for direction. 

MCX silver futures jumped above Rs 58000, trading up more than Rs 1300 at Rs 58683 per kg. It may face a resistance near Rs 59200 levels today.

Relief rally in metals was noticed on Tuesday as the markets strayed away bears after positive home sales data from the US. US Dollar lost momentum yesterday making commodities priced in Dollar cheaper. This also led some position building in Copper, Nickel and Aluminium.

In US, Department of Commerce said that new home sales rose 7.3% in April to a seasonally adjusted annual rate of 323000. The Dollar index moved lower on Tuesday settling at 75.92 as against 76.15 on Monday. The greenback moved away from its two-month highs of 1.3966, the buck settled at 1.4101.

Federal Reserve minutes for discount rate meeting released on Tuesday highlighted that bank directors generally noted that although the economic recovery was progressing, they were cautious about the economic outlook.

Some directors reported increases in consumer and business spending; gains were also noted in the manufacturing and agricultural sectors. Labor market conditions had continued to improve modestly, although many directors said unemployment was still higher than desired. The housing sector remained weak, and some directors noted that recent housing starts were lower than anticipated.

Elsewhere, International Copper Study Group (ICSG) report showed that Copper market registered a marginal deficit in the month ended February 2011. The markets of Copper showed a deficit of 17000 metric tonnes.

After making seasonal adjustments the world refined copper markets showed a deficit of 9000 tonnes. Apparent Refined Copper balance showed a deficit of 60000 tonnes in Jan-Feb 2011. A seasonally adjusted deficit of 72000 tonnes was noted in Jan-Feb 2011.

MCX Copper June contract closed at Rs 403 per kg, up 0.6%. Nickel benchmark contract closed at Rs 1034 per kg, up Rs 21 or 2%. Lead closed the trading at Rs 112.7 per kg on MCX, up 1.3% while Zinc was up 2.3% to settle at Rs 97.8 per kg.

COMEX Copper July expiry contract is seen trading at $ 4.04 per pound, up 3 cents. In Shanghai, Copper highest traded August contract is at 67080 yuan per tonne, up 960 yuan.

World crude steel production for the 64 countries reporting to the World Steel Association (worldsteel) was 127 million metric tons (mmt) in April 2011. This is 5.0% higher than in April 2010.

China’s crude steel production for April 2011 was 59.0 mmt, up 7.1% compared to April 2010. Japan produced 8.4 mmt of crude steel in April 2011, a decrease of -6.3% compared to the same month last year due to the production disruption caused by the recent earthquake and tsunami. South Korea produced 5.9 mmt of crude steel in April 2011, 15.9% more than in April 2010.

In the EU, Germany’s crude steel production for April 2011 was 3.8 mmt, a decrease of -1.7% compared to April 2010. Italy’s crude steel production was 2.5 mmt, up 9.8% compared to the same month last year. Spain produced 1.5 mmt of crude steel in April 2011, down -5.8% over April 2010.

Turkey’s crude steel production for April 2011 was 2.8 mmt, an increase of 14.3% compared to April 2010.The US produced 7.1 mmt of crude steel in April 2011, 2.1% higher than in April 2010.Egypt crude steel production in April 2011 was 0.5 mmt, a decrease of -0.8% on April 2010.

In April 2011, the world crude steel capacity utilisation ratio of the 64 countries was 82.8%, 0.9 percentage points higher than in March 2011. Compared to April 2010, the utilisation ratio remained unchanged.

US gold futures witnessed gains on positive global developments for the yellow metal with World Gold Council data showing China overtaking India in gold coins and bars. Base metals witnessed recovery after a slump at London Metal Exchange while natural gas rose on fall in US gas drilling rigs data.

Precious Metals
Gold futures gained this week after Fitch Ratings cut Greece’s credit rating boosting the appeal of the precious metal as a haven asset.

Gold imports by China may increase after investment demand more than doubled in the first quarter, with the country overtaking India to become the largest market for gold coins and bars, the World Gold Council said.

On Friday, gold futures for June delivery rose $16.50, or 1.1 percent, to settle at $1,508.90 on the Comex in New York. The price, up 1 percent this week, has climbed 6.2 percent this year.

Among other metals, Silver futures for July delivery rose 15.5 cents, or 0.4 percent, to $35.087 an ounce. The price, up 0.2 percent this week, has climbed 13 percent this year.

Palladium futures for June delivery rose $7.35, or 1 percent, to $735.50 an ounce on the New York Mercantile Exchange. The price, climbed 4.1 percent this week. Platinum futures for July delivery rose 40 cents to $1,769.40 an ounce.

In Indian market, MCX June Gold Futures opened the week at Rs.21952 and up by 0.97 % to 22167 after hitting a high of 22214 while August contract gained by 0.67 % to 22379 per 10 Grms. MCX Silver July opened this week at Rs.53807 and ended lower by 0.56% at Rs 53501 on profit booking at higher price levels.

Crude Oil
Oil rose for the second time this week after the American Petroleum Institute reported that fuel consumption increased in April as economic growth bolstered demand for diesel by truckers.

On Friday US Crude futures up after news that al Qaeda had plotted last year to hijack or sink oil tankers to prompt.

Crude oil may rise next week amid higher fuel demand in the U.S., a Bloomberg News survey showed.

On Friday, crude oil for June delivery gained $1.05 to settle at $99.49 a barrel on the New York Mercantile Exchange. Prices fell 16 cents this week. The June contract expired at the close of Nymex floor trading. July crude gained $1.17, or 1.2 percent, to $100.10 a barrel.

Brent crude for July settlement rose 97 cents, or 0.9 percent, to $112.39 a barrel on the London-based ICE Futures Europe exchange.

Total U.S. crude oil and petroleum product consumption jumped 5.2 percent in April from a year earlier to 19.886 million barrels per day, the American Petroleum Institute said in a monthly report.

At MCX, Crude oil June contract up from Rs.4496 to Rs.4509, slight up by 0.28% after hitting a high of 4588 whereas the July contract increased by 0.13 per cent to Rs.4554.

Base Metals
Copper futures rose at the weekend as traders viewed recent declines and falling global stockpiles as an excuse to buy.

On Friday, the most actively traded contract, for July delivery, recently traded 1.05 cent, or 0.3%, higher, at $4.0630 a pound on the Comex division of the New York Mercantile Exchange. Thinly traded May copper recently traded 1.1% higher, at $4.0925 a pound.

Readings on the U.S. housing and manufacturing sectors came in worse than expected this week, hitting sentiment in the copper market. The industrial metal is sensitive to changes in the economic outlook because of its widespread use in construction and manufacturing.

Copper futures have also taken cues from moves in currency markets recently, but were given less direction this week as the dollar moved indecisively. Like other dollar-denominated commodities, copper can fall when the greenback rises and makes the futures more expensive for market participants using other currencies.

Early indications of first-quarter mined copper output point to a softening trend of mine supply growth this year that should keep global production deficits firmly in place through 2011.

Copper inventories fell 15 percent from a week earlier, dropping 15,357 metric tons to 90,108 tons, according to a survey of 10 warehouses in Shanghai. That’s the lowest level since September, according to Bloomberg data. Holdings in two bonded warehouses lost 3,385 tons to 30,609 tons, the bourse said on its website.

In India at MCX, copper June contract rose marginally from Rs.400.90 to Rs.412.05 per Kg higher by 2.78 %, after hitting a high of 414.50 per Kg whereas the August contract ended up by 2.04 % to Rs.417.45 per Kg.

Natural Gas
Natural gas futures advanced this weekend as data showed the number of U.S. gas drilling rigs fell for a second consecutive week.

Gas gained 3.3 percent after Houston-based Baker Hughes Inc. said the rig total declined 8 to 866 this week. Prices also rose after gas settled near a six-week low on Friday, spurring buying from traders betting that the market had hit a bottom for now.

Natural gas for June delivery rose 13.6 cents to settle at $4.23 per million British thermal units on the New York Mercantile Exchange. The futures fell 0.4 percent this week.

Natural gas shipments to U.S. power plants were set to increase for a fifth day as hotter-than-normal weather in the South boosts demand for gas-fired electricity.

Gas stockpiles gained 92 billion cubic feet in the week ended May 13 to 1.919 trillion cubic feet, the Energy Department said. The five-year average change for the week is an increase of 91 billion cubic feet, department data show. Inventories rose 78 billion cubic feet a year earlier.

Temperatures may be normal or above-normal across most of the continental U.S. from May 25 through May 29, according to WSI Corp. in Andover, Massachusetts. Warmer-than-normal weather is likely along the Eastern Seaboard.

In India at MCX, Natural gas June contract closed down by 1.22% to Rs.193.70, after hitting a low of 188.30 per Kg, whereas the July contract declined to Rs.197.90 per Kg, a decline of 1.34 %.

Gold prices are likely to consolidate next week, holding within a range, as the market looks for further direction.

Silver prices remain volatile, but the tone toward the metal remains negative, especially as recent economic data suggests a possible slowing of industrial demand.

June gold futures on the Comex division of the New York Mercantile Exchange settled at $1,508.90 an ounce, up 1.024% on the week. July silver futures settled at $35.087 an ounce up 0.211% on the week.

In the Kitco News Gold Survey, out of 34 participants, 19 responded this week. Of those 19 participants, eight see prices up, while eight see prices down and three see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.

Following the recent volatility in prices, several market watchers said they’re looking for gold prices to consolidate and try to establish a new price range before deciding on the next way to move. Several market watchers said gold could trade between $1,480 and $1,520.

Technical analysts at Barclays Capital said if gold breaks support at $1,460, it may drop to $1,410, an area they said would represent a buying opportunity. They are near-term bearish on silver. If silver falls under $32.30, then prices could tumble to the $29.40-$30 region.

Ira Epstein, director of the Ira Epstein division of The Linn Group, said in the near-term he believes the negative seasonal tendency for metals to slip will take over. Epstein is a veteran of the markets and has followed the historical tendencies for metals.

“The month of June is not often friendly to gold or silver prices according to historical data provided by the Moore Research Center, Inc. Fall months are friendly in bullish environment years, due in part to demand for material stock for jewelry sales that begin pick up for the December holiday season,” Epstein said.

Epstein said the inflation theme has begun to stall out, noting the drop in the CRB Index, an index that tracks certain commodity prices.

“I remain in the bear camp (for gold) until prices turn around,” he said.

Later this summer he said it’s possible he might change his mind, but “it appears that right now the market bears remain in control.”

Those who see gold prices rising next week cite renewed concerns in Europe. The ongoing sovereign debt issues with Greece reignited when comments from the European Central Bank and the International Monetary Fund suggested that without further austerity measures and sale of assets by Greece, the ability of Greece to be able to repay debt soon coming due comes into question.

Furthermore, several market watchers said they are keeping an eye on the outcome of this weekend’s regional Spanish elections, which come ahead of next year’s national elections.

Media reports said it’s expected the ruling Socialist party will lose, with some polls showing they are likely to lose nine of the 13 regions and some key cities like Barcelona.

Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said the election is important because regions control spending on health care and education and account for half of government employees. They have an outstanding debt of 115 billion euros, about US$165 billion.

Chandler said there’s a risk that once new governments come into power they may find the deficit is much greater than expected. That happened in Spain’s largest region Catalonia, which said its deficit was really 60% more than what the previous administration said.

“It is thought that ahead of the regional elections, the existing governments have little incentive to implement the agreed upon austerity measures. The new regional governments will be under pressure to take most of this year's fiscal measures in the remaining months of the year,” he said.

Tom Pawlicki, metals analyst at MFGlobal, said he thinks overall that gold prices are expected to maintain a slightly higher trend over the next one to two weeks, provided support from the 50-day moving average in gold at $1,470 is held.

News this week from the World Gold Council gives underlying support. The industry group said in its first quarter demand trends that total demand rose by 4.6% quarter-over-quarter and 10.5% year-over-year, while total supplies fell 23.0% quarter-over-quarter and 4.4% year-over-year.

“We believe (it) will offer a generally bullish impact on gold prices. Forecasts on Chinese demand and official sector buying tipped the balance in favor of higher gold prices,” Pawlicki said.

The report showed that China surpassed India as the largest consumer of gold, which several analysts said will offer a floor for gold prices.

Next week brings durable goods orders and the revision to first quarter U.S. gross domestic product. MarketWatch expects a drop in April durable goods orders of 3%, versus the 4.1% rise in March. They said the GDP is expected to be revised slightly higher, to 2.2%, from the initial reading of 1.8%.

Pawlicki said some pressure in gold could come from weakening of industrial demand due to economic weakness and from a potential resumption of the commodity liquidation.

“There is still a tug-of-war taking place between those who believe the commodity trade has peaked in front of the end of QE2, and those who believe it is just a correction,” he said, adding that he is the later camp.