Going into the New Year, households could find gold declining by another Rs 1,000 to below Rs 26,000 per 10 gm, and petrol getting costlier as crude looks set to conclusively breach the $55bbl mark. Traders on US-based Comex and Intercontinental Exchange have placed bets in a way that bodes lower prices for gold and higher energy prices in early 2017.
Both gold and crude are among India’s chief imports and therefore have a direct bearing on the current account, and thereby the rupee. The rates have been ar rived at assuming currency remaining around Rs 67.90 to the USD. Options expiring in February on Comex indicate greater chances of gold breaking below $1,100 an ounce (appx 32.15 gms).The price of the option trades at $8.10 apiece, substantially above the average price of $5.8 since Trump won the US Polls in early November.
That event flagged anticipations of a stronger dollar as the President elect vowed to increase fiscal spending on infrastructure and manufacturing.
Contrast that to chances of the metal breaking out of $1,190 over the same period. Since the Trump victory, the option’s price has plunged below its average price of $30 since November 8 to close at just $3.6 on Friday. The price of the option is falling as chances of gold rising look steadily weaker.
Also, traders are placing more currency on gold breaking below $1,100 an ounce (current price $1,133) rather than testing $1,190 going by traders’ open positions.Traders’ open positions at 1,100 put are 13,387 contracts versus just 1,666 contracts of the $1,190 call.
The 1,100 and 1,190 price points correspond to roughly . 26,200-28,350 per 10 gm. Analysts like Vamsi Kona of Inditrade expect the bias to the lower level of the range. All the same, Kona expects Rs 26,000 to form a solid floor to price as that could spur buying by Indians, the secondlargest consumers of the metal after the Chinese. India imports normally 800 tonnes of gold each year.
On the crude front, though, things look a bit stickier. Options expiring March on Atlanta-based ICE indicate that traders are more bullish on oil breaching $57.57 a barrel. The open positions on the $55 barrel call option, whose average price has been $2.57 since Opec decided to cut output, are at 13109 contracts. The option’s price has jumped from $1.6 to $2.4 currently since Nov 30.
Against this, bets that oil could crack below $52.5 are substantially weaker, with open positions at just 6802 contracts. The price of the $55 put is just $1.5 way below the average price of $2.44 since the Nov end Opec meet.
“Data shows that our petrol bills are likely to get higher moving into the new year,“ said Suresh Nair, ED, ADMISI Commodities.“If the rupee cracks further from 67.90 levels the impact would be even greater.”
Source :- http://economictimes.indiatimes.com