1. RESEARCH & DEVELOPMENT DEPARTMENT, MEX. ALL RIGHTS RESERVED

2. Disclaimer
This presentation is being provided solely for informational purposes. Afghanistan Global Commodity Exchange Limited does not warrant the accuracy or completeness of any information provided in this presentation and such information is provided without any correctness or condition of any kind. Neither Afghanistan Global Commodity Exchange Limited nor any other person associated with the creation of this presentation or its contents shall be liable or responsible to any person for any harm, loss or damage that may arise in connection with the use of this presentation, including without limitation, any indirect, third party, or consequential damages.
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

3. Fundamental Analysis
The study of the factors that affect physical supply and demand.
General economic principle says demand and supply determine price.
Demand and supply situation helps predicting the price of commodities.
Generally,
Demand > Supply = Higher Prices
Supply >Demand = Lower Prices
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

4. Factors affecting demand and supply
Production and consumption Level
Trade practices
Government interference
Taxes
Political Events
Weather
Transportation cost
Technological change, etc
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

5. Factors affecting commodities price
Every major economic indicator released from major economies impact their respective currencies.
Positive economic data strengthens the currency and negative data weakens the currency.
This impacts the price of commodities accordingly.
US dollar is regarded as the strongest currency that impacts commodity prices.
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

6. Relationship between indicators
Inflation and interest rate, impact the Currency which ultimately impacts the price of commodities.
For Example:
if the inflation is rising in US, then demand for US currency will decline as their export becomes expensive.
In this scenario, the currency of major trading partners of the US will strength.
The price of Crude oil declines with the prospect of weaker US economy.
A weaker US dollar generally strengthens gold prices.
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

7. Major economies to follow
USA
Euro zone
China
Japan
Middle East
BRIC nation
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

8. Major Fundamental Indicators
Fundamental indicators released from US
Euro zone
China
Japan
emerging economy
impacts the commodities market.
US Economy
being the world’s largest economy has the biggest influence in the world economy.
US economy plays a bigger role in guiding currencies and commodity market.
However,
one cannot ignore the fact that due to integrated global business environment, Euro zone, China, Japan and other emerging country’s fundamental indicator also play a bigger role in commodity market.
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

9. Major Fundamental Indicators
Monetary Indicators
Economic Indicators – US
International
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

10. Major Fundamental Indicators
Monetary Indicators
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

11. Market in Crisis
One of the major news that can severely affect the market is monetary policy changes by major economies, we give three examples
A) Quantitative Easing ( US federal reserve)
B) Euro Zone stimulus
C) Chinese stimulus
Quantitative Easing 2, November 3rd 2010
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

12. Chinese Stimulus, November 2008 (discharged over 2009-2010)
Euro Stimulus, June 24th 2009
Chinese Stimulus, November 2008 (discharged over )
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

13. Adverse news affects the market for commodities
The start of the financial crisis started with the realization that many big financial companies were in trouble. The main crisis was in the housing market and this became evident when series of news reports from mid-July to August confirmed the fear.
Conversely, good news such as stimulus packages builds market confidence and rallies the prices of commodities that are demand driven.
During start of the financial crisis, Oil hit a high of around $145 mark and tumbled all the way to around $35 in a matter of 6 months.
In the next slide, we see a series of events that led to the financial crisis and its relation to the Crude Oil price decline.
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

14. Countrywide Financial Corporation warns of “difficult conditions.”
July 11, 2007, Standard and Poor’s places 612 securities backed by subprime residential mortgages on a credit watch.
July 24, 2007 | SEC Filing
Countrywide Financial Corporation warns of “difficult conditions.”
July 31, 2007 | U.S. Bankruptcy Filing
hedge funds that invested in various types of mortgage-backed securities.
August 17, 2007 | Federal Reserve Press Release
Following an intermeeting conference call, the FOMC releases a statement about the current financial market turmoil, and notes that the “downside risks to growth have increased appreciably.”
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

15. February 13, 2008 | Public Law
President Bush signs the Economic Stimulus Act of 2008 (Public Law ) into law.
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

16. Major fundamental indicators…
Economic Indicators - US
Employment situation
Weekly unemployment claims
Retail sales
GDP
Industrial Production/ capacity utilization
ISM report - Manufacturing
Chicago Purchasing Managers Index
Consumer price Index (CPI)
Producer Price Index (PPI)
Productivity and cost
Consumer confidence index
Durable goods orders
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

17. Major fundamental indicators…
Economic Indicators – International
German Industrial Production
German IFO Business Survey
German Consumer Price Index
Japan Tankan Survey
Japan Industrial Production
OECD composite leading indicator (CLI)
Industrial production of China
Industrial activity in other BRIC countries
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

18. Market sentiment Commitment of Traders (COT) report
Released by CFTC on weekly basis
COT reports provides a breakdown of each Tuesday open interest for markets in US.
The reports includes open interest separated by reportable and non reportable position.
For reportable position additional data is provided for commercial and non commercial. The data includes:
Changes from previous report
Percents of open interest by category
Number of traders
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

19. Useful resources www.forexfactory.com www.bloomberg.com
RESEARCH & DEVELOPMENT DEPARTMENT, AGCXL.ALL RIGHTS RESERVED

20. For further updates, Like our pages or Visit our website!
Facebook:
Twitter:
LinkedIn: