Commodity Research Report Ways2Capital 22 August 2016

Gold prices edged lower in European trade on Wednesday, reversing overnight gains as market players looked ahead to minutes of the Federal Reserve’s July policy meeting, which many feared could be more hawkish than the statement

Gold prices edged lower in European trade on Wednesday, reversing overnight gains as market players looked ahead to minutes of the Federal Reserve’s July policy meeting, which many feared could be more hawkish than the statement. Gold for December delivery on the Comex division of the New York Mercantile Exchange shed $ 9.95, or 0.73%, to trade at $1,346.95 a troy ounce by 3:05 AM ET, after rising $ 9.40, or 0.7%, on Tuesday. Investors will be focusing on minutes of the Federal Reserve’s most recent policy meeting due at 2:00 PM. for further clarity on the timing of the next U.S. rate hike.
Gold edged back above $1,350 an ounce on Thursday as the dollar gave up earlier gains against a currency basket, with uncertainty over the outlook for U.S. monetary policy continuing to underpin the metal. Palladium slid, however, after surging more than 4 percent in the previous session in a rally triggered by a wave of short-covering after recent hefty gains. The metal is testing support at the $700 an ounce level.
Glencore has shelved plans to sell a copper mine in Chile that was expected to fetch about $500 million, after failing to achieve a high enough price, according to people familiar with the situation. Along with other big mining companies, Glencore has been seeking to offload a range of assets to reduce debt following a commodities price crash, but a rally on raw materials markets and in the value of share prices of mining companies this year has taken away the need for urgent sales at any price.
Extending gains for the second day, nickel prices advanced by 0.61% to Rs 689.30 per kg in futures trading today as participants engaged in enlarging their positions, tracking a firm trend at spot market on rising demand from consuming industries.At the Multi Commodity Exchange, nickel for delivery in August month gained Rs 4.20, or 0.61% to Rs 689.30 per kg in business turnover of 1,893 lots.
Taking weak cues from overseas markets, silver prices moved down by 0.22% to Rs 46,232 per kg in futures trade today as participants cut down their bets.At the Multi Commodity Exchange, silver for delivery in September declined by Rs 104 or 0.22% to Rs 46,232 per kg in business turnover of 646 lots.Likewise, the white metal for delivery in December contracts was trading lower by Rs 94 or 0.20% to Rs 47,353 per kg in 18 lots.
Crude oil held gains in Asia on Friday with Brent comfortably above $50 a barrel as an output freeze by key producers was said to be gaining traction, though vast global oversupply continues to hang over the market. On the New York Mercantile Exchange, WTI crude for September delivery gained 0.27% to 48.35 a barrel. On the Intercontinental Exchange, Brent crude for October delivery inched up 0.06% to $50.92 a barrel. Overnight, Brent crude futures surged above $50 for the first time since Fourth of July, while hitting its highest level in nearly two months, as global oil prices continued to rally on the prospects that major producers could reach a deal to stabilize worldwide energy markets at a closely-watched meeting next month.

Gold prices advanced for a second day by gaining Rs 55 to Rs 31,130 per 10 grams at the bullion market on Tuesday, tracking a firming trend overseas amid increased buying by Jeweller s to meet rising demand from retailers at domestic spot market. Silver also recovered by Rs 500 to Rs 47,000 per kg due to increased off-take from coin makers and other consuming industries.

Gold cut its gains on Tuesday after mixed US economic data failed to give clarity on the prospects for a US interest rate rise this year and the US dollar pared losses from a seven-week low. US consumer prices were unchanged in July as the cost of gasoline fell for the first time in five months and underlying inflation moderated, while US housing starts unexpectedly climbed and industrial production rose more than forecast in the same month.

Gold imports more than halved to $ 4.97 billion in the first four months of the current fiscal, which is expected to keep a lid on the current account deficit. The sliding prices of the precious metal in both global and domestic markets are seen as a contributory factor for the 52.5 per cent decline. Gold imports stood at $ 10.47 billion in April-July of 2015. The in-bound shipments contracted for the sixth consecutive month in July by 63.65 per cent to $1.07 billion, according to Commerce Ministry data.

The global economic crisis will continue to drive the demand for gold and silver worldwide. Bullion experts at the India International Gold Convention organised by Foretell Business Solutions Limited unanimously expressed that global demand will continue to remain strong, and price higher. It is also expected that gold demand in India, which was declined in first half of calendar year 2016, will increased in second half of the year. "Demand is expected to come back and price discounts expected to narrow form October. The overall demand is expected to remain around 380 to 400 tonnes for second half of calendar 2016 on account of increase in farmers' incomes, salary arrears to central government employees under 7th Pay Commission and festive demand," said Debajit Saha, head of bullion research at Foretell Business Solutions Pvt Ltd.Gold demand remained extremely poor in the first half of current calendar year. Market had entered into dip discount, impacting official supply of gold. Discount increased the moment government announced levy of the excise duty, which prompted jewellers to go on a long strike. Three factors pulled demand down. High import duty incentivized parallel imports. Announcement of excise duty and the subsequent strike, lead to destocking at jewellers end. Last, unanticipated increase in price of gold in early 2016, pushed domestic prices and drove demand out further, besides increasing scrap flows.

Physical gold demand in Asia improved modestly this week as consumers returned to the market ahead of upcoming festivals in India and China when demand is usually high. In India, the world's second biggest gold consumer, discounts narrowed as jewellers started buying for the festive season. Dealers were offering a discount of up to $52 an ounce over the global spot benchmark XAU= , down from up to $60 last week.
"Large jewellers have started building inventory for the upcoming festival season. In coming weeks, demand is expected to pick up further if prices remain stable at the current level," said a Mumbai-based bullion dealer with a global bank. India's gold demand may rise in the second half of 2016 after falling to the lowest in seven years in the first half as monsoon rains spur rural demand during the peak festive season, the World Gold Council said on Aug. 11. of gold demand in India comes from villages, where jewellery is a traditional investment.

Crude futures rose to fresh 1-month highs on Tuesday, ahead of the American Petroleum Institute's weekly inventory report, as investors continued to weigh the possibility that discussions between leading OPEC producers at an energy forum next could help stabilize global oil prices. On the New York Mercantile Exchange, WTI crude for September delivery traded between $ 45.34 and $ 46.61 a barrel before closing at $ 46.58, up 0.83 or 1.84% on the session. Since dipping below $40 a barrel earlier this month, WTI crude has rallied more than 17% over the last two weeks. On the Intercontinental Exchange, brent crude for October delivery wavered between $ 47.90 and $ 49.33 a barrel, before settling at $ 49.32, up 0.95 or 1.95% on the day. At session-highs, brent futures reached their highest level since July 7.

Oil prices fell in Asia on Wednesday in continued reaction to U.S, industry estimates of stockpiles last week that showed gasoline inventories unexpectedly higher even as crude stocks fell. On the New York Mercantile Exchange, WTI crude for September delivery fell 0.52% to $46.34 a barrel. On the Intercontinental Exchange, Brent crude for October delivery dropped 0.73% to $48.87 a barrel. The American Petroleum Institute reported a bigger-than-expected 1 million-barrel drop in U.S. crude supplies that was unexpected, sources said, but gasoline supplies jumped 2.2 million barrels for the week ended Aug. 12, a worrying demand signal well ahead of the end of the summer driving season.

President Nicolas Maduro said on Tuesday that Venezuela had struck $4.5 billion in mining deals with foreign and domestic companies, part of plan to lift the OPEC nation's economy out of a deep recession causing food shortages and social unrest. Maduro said the deals were with Canadian, South African, U.S. and Venezuelan companies, but did not specify whether contracts had been signed or just initial agreements.
The socialist leader, whose popularity hit a nine-month low in a survey published this week, said he expected $20 billion in mining investment contracts to be signed in coming days and that 60 percent of the income Venezuela received would be spent on social projects. Maduro hit back at critics from the left who accuse him of riding roughshod over environmental rules and indigenous rights in the Orinoco mineral belt in Venezuela's south in his rush to shore up his government's precarious finances.

The price of oil is jumping for a third consecutive day on after some reassurance for the markets that oil's biggest players are working to try and stabilise the world's most important commodity. Both major oil benchmarks are up by just less than 1% in early trading on Monday, with Brent crude, the international benchmark higher by 0.94% to $47.41 per barrel. US West Texas Intermediate crude is up by the same margin to trade at $44.91.

Copper eased by 0.25 per cent to Rs 320.40 per kg in futures trade today today as traders trimmed positions amid sluggish demand at the domestic spot markets. At Multi Commodity Exchange, copper for delivery in August month declined by 80 paise, or 0.25 per cent to Rs 320.40 per kg in business turnover of 870 lots. Similarly, the metal for delivery in November contracts shed 70 paise, or 0.21 per cent to Rs 326.80 per kg in 26 lots.

Copper futures rose 0.48 per cent to Rs 326.95 per kg today as participants enlarged their positions, taking positive cues from overseas markets and pick-up in spot demand. At the Multi Commodity Exchange, copper for delivery in current month contract was trading higher by Rs 1.55 or 0.48 per cent to Rs 326.95 per kg with a turnover of 1,469 lots.

Amid a firm global trend and pick up in demand at domestic spot market, copper prices traded higher by 0.16% to Rs 317.60 per kg in futures trade today as speculators enlarged positions. At the Multi Commodity Exchange, copper for delivery in August traded higher by 50 paise or 0.16% to Rs 317.60 per kg in business turnover of 323 lots.

National Commodity & Derivatives Exchange today said its cotton contract has performed well registering a jump of 338 per cent at Rs 1,376.71 crore for the quarter till March 21, 2016. "Our cotton contract has performed well and traded value jumped by 338 per cent at 1,376.71 crore for the quarter till March 21, 2016 as against Rs 313.99 crore in the quarter ended December 2015," NCDEX said in a statement here. As prices of pulses continue to rule high, the government on Tuesday decided to further import 1 lakh tonnes of chana and masoor dals to boost domestic supply and check price rise.A decision in this regard was taken in the meeting of an inter-ministerial committee, headed by Consumer Affairs Secretary Hem Pande in New Delhi.

Sowing of kharif crops in the first week of August remained on track as rains continued to be plentiful and acreage under most major crops such as rice, pulses, coarse cereals and oilseeds posted a rise compared to the previous year. Total acreage under kharif crops till August 5 this year at 885.29 lakh hectares compared to 841.65 lakh hectare sowed in the same period last year. Cotton was the only crop where acreage declined considerably to 96.48 lakh hectare till August 5 this year compared to 105.68 lakh hectare in the same period last year. Many farmers sowing cotton switched to other crops because of last year’s damage to the But cotton crop by white flies in Punjab and Haryana. Pulse acreage continued to be high with total acreage in the period rising to 121.10 lakh hectare. Rice acreage increased to 281.95 lakh hectare. Sowing of coarse cereals till August 5 rose to 163.77 lakh hectare compared to 158.66 lakh hectare in the same period of the previous year. Oilseeds acreage too gained at 167.58 lakh hectare. While sugarcane sowing increased marginally from 46.87 lakh hectare to 46.11 lakh hectare in the same period last year, jute sowing edged down to 7.55 lakh hectare to 7.73 lakh hectare.

Agri commodity prices have started softening after reports of ‘above normal’ monsoon so far this season, raising the prospects for better kharif crops. Government data showed 11 per cent decline in the modal prices of moong dal this month; it currently sells in the wholesale market at Rs 80 a kg.Masoor dal also reported a decline in its prices by 5.3 per cent at Rs 71 a kg. Urad dal and gram dal also posted 7.7 per cent and seven per cent fall in their modal prices at Rs 133.83 a kg and Rs 93 a kg, respectively. Tur dal, however, stabilised at Rs 130 a kg as on August 16.
Jeera prices rose 0.75% to Rs 18,160 per quintal in futures trading on Wednesday as participants raised their bets, tracking a firm trend at spot market on rising domestic as well as exports demand. Further, tight stocks position following lower supply from the producing belts too fuelled the uptrend. At the National Commodity and Derivatives Exchange, jeera for delivery in August contracts rose by Rs 135 or 0.75%, to Rs 18,160 per quintal with an open interest of 273 lots.

Soyabean futures traded lower by Rs 35 to Rs 3,734 per quintal today after traders trimmed their positions, tracking a weak trend overseas. At the National Commodity and Derivative Exchange, soyabean for delivery in far-month February month slipped by Rs 35, or 0.93 per cent to Rs 3,734 per quintal, clocking an open interest of 2,100 lots. In a similar manner, soyabean for delivery in most- active October month receded by Rs 20, or 0,56 per cent to Rs 3,575 per quintal having an open interest of 53,530 lots.

Majority of oils in Indore mandis have been witnessing an uptrend on strong global cues and improved domestic demand with soya refined being quoted at Rs.650-55, while soya solvent ruled at Rs. 615-620 up 15. Cotton oil also ruled higher at Rs. 700 up 20 from last week. Similarly, palm oil also gained higher at Rs. 665 up 40, while groundnut oil ruled at Rs.1,470-75 1,440-60. Amid negligible arrival, mustard seeds ruled flat at Rs. 4,250-4,300 a quintal, while raida was quoted at Rs.4,200-50. Plant deliveries of mustard oil for Jaipur line were also quoted lower at Rs. 5,060-65.

Rise in duty on imported oils by the Centre lifted soya oil in Indore mandis. In private trading, soya refined ruled at Rs.635-40, while soya solvent rose to Rs.600-605. Soyabean remained flat Rs.3,700 on subdued demand, while plant deliveries also ruled steady at Rs.3,750. Given enthusiastic crop report, rally in soybean appears unlikely in the coming days. Soyameal ruled firm at Rs. 33,000-35,000 a quintal on improved domestic demand.

The active chana futures hit the upper circuit to close at a record high of Rs 5,543 a quintal on Friday despite the arrival season having got under way. Brokers and traders attributed the jump to production expected to be two-fifths below last year's 87 lakh tonnes. Traders were also comforted by fears of a ban in chana futures getting allayed by a regulatory clarification. Rather, the regulator directed NCDEX, which offers chana futures, to raise the margin on buyers to 45% from 20% effective April 22. So despite the special cash margin kicking in on Friday, chana hit a record high.

At Erode market, finger prices traded at Rs.8500ql and bulb prices at Rs.8100/ql and arrivals were at 2198 bags. Sowing has continued to progress on a firm note in Telangana and Andhra Pradesh. Sowing coverage as on 17th Aug 2016 in Telangana was at 44919 hec, higher by 15% y/y while it is higher by 8% y/y in Andhra Pradesh. The prices of turmeric are moving sideways to down due to mixed fundamentals of good sowing acreage coupled with declining supplies. The Sep’16 delivery contract on NCDEX closed 0.18% higher to settle at Rs 7,694 per quintal. The demand from the industrial may support prices. Turmeric acreage in Telangana as on 17 Aug was up 15.4 % at 45,000 hectares as compared to 39,000 hectares last year. Sowing of turmeric is over in 93 per cent of normal area and up by 110 % of normal sowing area. As per dept of commerce data, turmeric exports in April- May 2016 increased by 31% compared to last year at 21,256 tonnes. In 2015-16, 85,426 tonnes exported compared to 90,738 tonnes in 2014-15. Major export destinations in 2015-16 are Iran, Malaysia, UAE, USA and Srilanka. The arrivals in the main physical markets such as Nizamabad, Duggirala (AP), Salem, Erode and Sangli reported decreasing. There is expectation of lower arrivals and good upcountry demand may lend support in coming weeks.

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