Dubai Gold & Commodities Exchange: Weekly Market Views - February 21, 2010

Commodities Overview

Currencies Overview

Commodities prices may be volatile this coming week, but with an upward bias. Over the past few weeks oil, gold, and other commodities have demonstrated strong support around recent price levels. Sharp increases in the dollar, the IMF’s announcement that it was moving toward public sales of 191 metric tonnes (6.1 million ounces) of its gold, the U.S. Fed’s raising the discount rate, evidence of stronger economic growth in the United States and other parts of the world, and stronger corporate earnings and equity markets all have failed to trigger a major sell-off in gold. Prices have dipped in response to announcements related to these developments, but the declines have not been particularly large. Nor have they been protracted. Each dip has been answered by significant buying from investors seeking to add to their gold positions whenever prices drop. Energy prices may take a breather this week, following strength last week. Even so, demand remains in an upward trend, and investors remain interested in energy assets as likely to appreciate in value as real economic activity continues to expand in most parts of the world. Periodic bouts of investor doubt over the course of economic trends will occasionally push prices, however, but the trend is upward......more detail

The U.S. dollar is expected to continue along the path of recent weeks, showing overall strength but consolidating its gains against major currencies rather than running away to higher levels. The dollar is showing strength, reflecting investor attitudes that the U.S. economy may register stronger growth in 2010 and 2011 than Europe and Japan. The strength in the dollar has not been one-way, however: The dollar’s exchange rate against the euro and other currencies has been and is expected to continue to be volatile. While there is a clear upward bias emerging for the dollar, it also is clear that on-going fiscal, budgetary, and trade concerns remain in the forefront of investors’ minds. The dollar is looking stronger against other major traded currencies such as the euro, pound, yen and Swiss franc, but it is a matter of degrees of unattractiveness that is helping boost the dollar at this time. As a result, the dollar may show signs of consolidation this week, as part of a longer term upward trend against other major traded currencies. The dollar will remain vulnerable relative to the rupee and currencies from emerging economies and commodities exporting nations, however. Political tensions also could hit the dollar this week.