OUTLOOK

Bullion
Bullion prices traded on the higher side in yesterday’s sessions as the dollar was seen
letting off it gains against the euro ahead of the presidential election in the nation.
Speculation that the democratic candidate Senator Obama who leads the national
polls, will win against the Republican, helped send the dollar lower and lift the
commodity and equity markets. Given varied views and plans of the divergent party
heads, the impact of the likely presidential candidate, is different on the markets.
With democrats, there is an assumption of potentially more inflation given their
spending plans. Obama has called for a second economic stimulus package valued at
$175 billion to help revive U.S. growth. This idea of higher inflation is likely to
increase the appeal of the commodities as an inflation hedge hence resulting in a
relief rally in prices.
For the day, the expected decline in the ISM non-manufacturing index is likely to
weigh down the US dollar and prove positive for bullion. However the ECB interest
rates due be released tomorrow and expectation of 50 basis cut by ECB may cap the
gains for the metal.
Crude oil
Crude oil prices were seen to take a pullback in yesterday’s trading session as the
weaker US dollar prompts this rally in the market. Prices made a high of $71.77 per
barrel as the dollar seemed to lose it gains on the Election Day. Given the additional
stimulus of $175 billion dollars proposed by the democrat Obama and increasing bets
of him coming into power, worked positive for all the commodities. Hence oil prices
were boosted by the biggest presidential-election day rally in the U.S. stock markets
in 24 years and the fading dollar. In addition, Saudi Arabia and United Arab Emirates,
OPEC’s first and fourth-largest oil producer, implementing the supply cuts agreed on
by the group is also proving to be positive for prices.
On the electronic session today prices are presently trading below $70 per barrel as
the relief rally yesterday leads to profit booking. According to the DOE the crude and
distillate stocks are likely to post an increase compared to decline expected in
gasoline stockpiles. As per the expectation the data is likely to have a mixed impact
on prices; however the actual numbers need to be looked in for further direction. For
the day prices are likely to remain on the sidelines ahead of the inventory data.

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