COMMODITY WRAP

Commodity prices shot up in sync with the rally across asset classes after the US Federal Reserve said that it would keep interest rates near zero levels until 2014 and hinted at a further economic stimulus. The dollar lost value and precious metals rallied. Gold has gained over 9% in January . Any price correction would be a good entry point given expectations of a strong rally. Base metals gained the most in four weeks as investors bet the expected liquidity would push prices higher in coming months. Copper & tin were the biggest gainers.

WHEAT
Wheat prices could not remain unaffected from the speculative buying on back of the Fed-induced stimulus. The Fed moves are likely to further weaken the US dollar — making American exports attractive. The US is a leading exporter of wheat. Hence, it was natural for speculators to buy into the commodity. According to US data, exporters sold 6,18,700 metric tonnes of wheat during the week ended January 19 — the highest quantity since September. Russia, a rival exporter, may impose a tax to limit exports if shipments exceed 24-25 million tonnes. The proposed move also strengthened bullish sentiment in the US wheat futures.