Silver choppy

COMMODITY SPIKES

Moving in tandem with gold and base metals, silver prices fell 4 per cent last week to close at Rs 19,010 on Friday compared with Rs 19,490 a kg on Monday, in the domestic bullion market. The white metal remained volatile throughout the year amid a discounting dollar and slowing US economy.

In futures, however, silver for January delivery remained volatile to close a little higher at Rs 18,739 on Friday from Rs 18,626 a kg in the beginning of the week. During the week, the precious metal touched a high of Rs 18,891 and a low of Rs 18536 a kg.

Open interest (OI) for near month contract rose sharply on rising demand to 50,640 kg on Friday from 36,810 kg on Monday. The higher OI indicates that investors are bullish towards the outlook of silver in the wake of falling dollar.

On MCX, the near month contract for silver closed lower at Rs 18,846 on Friday compared with Rs 19,594 a kg on Monday. All MCX silver contracts clocked an aggregate turnover of Rs 16,191.22 crore during the week. Their total trade volume stood at Rs 8,371,850 kg.

The outstanding position for all MCX silver contracts for the week was 3,82,430 kg.

The March silver contract on the New York Mercantile Exchange climbed 14.5 cents to close at $12.635 an ounce, but after losing 22 cents in the last two days it ended the week with a loss of 2.7 per cent.

Mentha oil slump continues

Continuing its declining trend in futures trading, mentha oil saw its prices tumbling by 7.38 per cent during the week in the near-month contract. On the back of lacklustre demand, both in the domestic and the export market, the prices declined by 12.72 per cent during the month. The week closed at Rs 590 a kg against the week's opening of Rs 637 a kg, down by Rs 47. At the start of the month, futures were being traded at Rs 676 a kg.

According to Chandausi-based traders, mentha has slipped into the hands of speculators. Though the spot prices are still maintaining at a level above Rs 625 a kg, traders said the spot market might not remain isolated from the downward trend. At the beginning of the week, mentha had a support level of Rs 625 per kg. However, once the level was crossed, the market quickly crashed and slipped to below Rs 600 mark.

Interestingly, the period between December and January normally has mentha oil at its peak levels. However, this year, the trend has reversed. The estimated production this year is 21,000 - 22,000 tonne.

Pharmaceutical companies are the major end consumers of metha oil. Domestic consumption of mentha oil is on the rise. In 2005, it was around 5,000 tonne, which, analysts say, is expected to be at 9,000 tonne in 2006. ast week proved bearish for the near-month contract of Mentha oil.

On Ncdex, Mentha oil futures dipped almost by 5 per cent to Rs 613 a kg on Saturday against the week's opening of Rs 645 a kg. January futures showed the same trend with futures dropping to Rs 626 level from Rs 659 a kg.

According to commodities analyst, levels below Rs 600 could not be ruled out. However, they added that bearish phase may not be for a long term. "Market demand is poor. On the export front, demand came early this year on the speculation of less output," said an analyst with Religare Commodities.

He added that exporters may take advantage of the bearish phase which is expected to push the demand. Once the demand picks up, prices may see some upward correction in the next one and a half week.

India's consumption of mentha oil is on the rise. In 2005, it was around 5,000 tonne, which, analysts said, is expected to rise to 9,000 tonne in 2006.