Commodity Research Report Ways2Capital 17 october 2016

Gold prices edged lower on Friday as stocks firmed and the US dollar rose on expectations the Federal Reserve would raise interest rates by the end of the year.

MCX - WEEKLY NEWS LETTERS
? BULLION
Gold prices edged lower on Friday as stocks firmed and the US dollar rose on expectations the Federal Reserve would raise interest rates by the end of the year. Spot gold was down 0.1 per cent at $1,256.50 an ounce by 0257 GMT. The metal was on track to end the week mostly flat. US gold futures were steady at $1,257.90 an ounce. "People are happy to buy at these levels. But, there are a lot of expectations of a Fed rate hike in December, which will be bearish for gold," said Ronald Leung, chief dealer, Lee Cheong Gold Dealers in Hong Kong. There will also be some uncertainty going into the elections, said Leung adding that if Democratic presidential candidate Hillary Clinton wins over Republican Donald Trump then the dollar could strengthen and pull gold down. "Gold looks a bit weaker on charts. We need to see if prices can hold at $1,240 levels ... then we would be heading towards $1,260 and later to $1,275," he said. Spot gold may consolidate further in a narrow range of $1,250-$1,266 per ounce for one day before falling to the October 7 low of $1,241.20, according to Reuters technical analyst Wang Tao. Markets will next look to Friday's US retail sales data and remarks from Fed Chair Janet Yellen, who will address a Boston Fed economics conference at which Boston Fed governor Eric Rosengren will also speak. "We think its rate hiking trajectory will remain very much intact," INTL FCStone analyst Edward Meir said in a note. "As a result, the dollar will likely push higher going into year-end, offering gold its most formidable headwind and even countering the impact of weaker equities." The dollar index, which measures the greenback against a basket of six major currencies, gained 0.1 per cent to 97.612. Asian stocks edged higher and the dollar bounced on Friday as global markets took a breather after being churned by downbeat Chinese economic data the previous day. Global equity markets had slumped to a three-month low on Thursday. Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.28 per cent to 961.57 tonnes on Thursday. Among other precious metals, silver edged 0.3 per cent lower at $17.39 an ounce. The metal was on track for its third consecutive weekly loss. Platinum was down for the fifth straight session as it fell 0.3 per cent at $933.75 an ounce. The white metal is down over 3 per cent this week. Palladium shed 0.3 per cent to $636. 10 after having touched a new three-month low of $633.22 an ounce. The metal is down over 4 per cent this week.

Demand for gold in India, the world's second-largest consumer, picked up as the festive season began and discounts narrowed, while demand across rest of the Asia continued to improve. Gold traded within a narrow range throughout the week, after falling nearly 5 per cent in the previous week. Gold discounts in India narrowed to the smallest level in nearly nine months as prices fell during a key Hindu festival Dussehra boosted retail demand. Dealers were offering gold at $2 an ounce discounts to official domestic prices this week, the narrowest since the week ending on January 23. Last week discounts were $4. "During Dussehra demand was very good. Jewellery shops were crowded after a long time," said Fatechand Ranka, a jeweller based at Pune in western state of Maharashtra. India celebrated the Dussehra festival on Tuesday. "At the end of the month we have Diwali festival. If prices remain at the current range, then certainly demand will remain robust even during Diwali." Demand for gold usually strengthens in the final quarter of the year as India gears up for the wedding season as well as festivals such as Diwali and Dussehra, when buying the precious metal is considered auspicious.

? ENERGY
Oil prices on Tuesday retreated from one-year highs, after OPEC said it was trying to reach a global agreement to cap production for at least six months amid doubts about how much that would reduce a crude glut. The International Energy Agency, the energy watchdog of the West, said it was unclear how rapidly global oil supply could fall in line with demand even if the OPEC Countries and major producer Russia agreed on a steep output cut. "Net, we find that an agreement to cut production, while increasingly likely, remains premature given the high supply uncertainty in 2017," Goldman Sachs said in a note. a deal would be "self-defeating if it were to target sustainably higher oil prices," Goldman said. Oil has rallied than 13 percent in less than two weeks since OPEC proposed its first production curbs in eight years. Still, prices remain about half of mid-2014 highs above $100 a barrel. On Tuesday, Brent crude LCOc1 settled down 73 cents, or 1.4 percent, at $52.41 a barrel, retreating from a one-year high of $53.73 hit on Monday. U.S. West Texas Intermediate crude CLc1 fell 56 cents, or 1 percent, to settle at $50.79. Global oil industry officials in Istanbul for the World Energy Conference issued a raft of statements on OPEC's production plan.

India's purchases of Iranian oil fell 4.1 percent in September, slipping from August when imports from Tehran hit their highest in at least 15 years, according to ship tracking data and a report compiled by Thomson Reuters Oil Research and Forecasts. India, Iran's top customer after China, still imported about 552,200 barrels per day of oil from the Persian Gulf nation in September, more than double the same month a year ago following the end of sanctions targeting Tehran in January. India's oil imports from Tehran in January-September grew 90.5 percent to an average 411,900 bpd oil, the data showed. Iran has been boosting oil shipments to recoup market share ceded to rivals Saudi Arabia and Iraq. The OPEC producer's total crude oil and condensate sales likely reached around 2.8 million barrels per day in September, two sources said, nearly matching a 2011 peak in shipments before sanctions were imposed. along with Libya and Nigeria, is allowed to produce "at maximum levels that make sense" as part of any output limits in a surprise deal reached last week by the Organization of the Petroleum Exporting Countries.

Oil prices fell on Thursday after OPEC said its production had risen to the highest level in at least eight years and following reports of an increase in U.S. crude stockpiles. International Brent crude oil futures LCOc1 were trading at $51.37 per barrel at 0256 GMT, down 44 cents, or 0.85 percent, from their previous close. U.S. West Texas Intermediate crude futures were down 54 cents, or 1.08 percent, at $49.64 per barrel.Traders said oil markets had come under pressure after the Organization of the Petroleum Exporting Countries reported a rise in output, despite the producer cartel having plans, potentially with non-OPEC producer Russia, to cut output in a bid to rein in a global supply overhang. "Crude responded predictably, with both Brent and WTI falling," said Jeffrey Halley, senior market analyst at brokerage OANDA in Singapore. OPEC on Wednesday reported its oil production climbed in September to the highest in at least eight years and raised its forecast for 2017 non-OPEC supply growth, pointing to a larger surplus next year despite the group's deal to cut output. The producer cartel pumped 33.39 million barrels per day last month, according to figures OPEC collects from secondary sources, up 220,000 bpd from August. the absence of any OPEC-Russia headlines to give crude its daily adrenaline shot, the market looks nervously to the EIA Crude Inventory figures due in the U.S. this evening," Halley added. The U.S. Energy Information Administration is due to publish official storage inventory data later on Thursday. The American Petroleum Institute, a trade group, reported on Wednesday that U.S. crude inventories rose by 2.7 million barrels to 470.9 million barrels in the week to Oct. 7. This would be the first rise in oil stocks following five straight weeks of declines. softer gasoline consumption, flagging demand from China and the return of refineries from maintenance will likely drive up global stock levels over Q4," BMI Research said in a note,

? BASE METAL
Nickel futures traded 1.34 per cent down at Rs 697.10 per kg on Thursday as speculators reduced their exposure, tracking a weak trend in base metals at the London Metal Exchange amid muted demand at the domestic spot markets. At the Multi Commodity Exchange, nickel for delivery this month shed Rs 9.50 or 1.34 per cent to Rs 697.10 per kg in a business turnover of 2,451 lots.The metal for delivery in November too fell by Rs 8.90 or 1.25 per cent to trade at Rs 703 per kg in 114 lots. Market analysts said the fall in nickel prices was mostly in tune with a weak trend in the base metals pack at the LME as an unexpected drop in Chinese exports spurred concern about the outlook for the global economy.China's exports plummeted 10.0 percent year-on-year to $184.5 billion in September, government data showed on Thursday.Besides, muted demand from alloy-makers at the domestic spot markets weighed on metal prices in futures trade here.Globally, nickel prices retreated by 1.6 per cent at the LME, reversing earlier gains.

Lead prices were down 0.29 per cent to Rs 135.50 per kg in futures trading today as participants reduced their exposure, triggered by subdued demand from consuming industries in the spot market and weak global cues. At the Multi Commodity Exchange, lead for delivery in November month declined by 40 paise, or 0.29 per cent to Rs 135.50 per kg in business turnover of 24 lots. Likewise, the metal for delivery in current month contracts shed 25 paise, or 0.19 per cent to Rs 134.85 per kg in 483 lots.
Marketmen said the weakness in lead futures was due to a sluggish demand from battery-makers at the domestic markets, apart from weak global cues after China's exports unexpectedly declined, raising global demand outlook.

Zinc futures fell by 0.30 per cent to Rs 150.45 per kg today as speculators indulged in reducing positions amid a weak trend in base metals overseas and low spot demand. Zinc for delivery in current month shed 45 paise or 0.30 per cent to Rs 150.45 per kg at the Multi Commodity

Exchange. It clocked a business turnover of 734 lots. The metal for delivery in November too fell by a similar margin to trade at Rs 151.10 per kg in 23 lots. Analysts attributed the fall in zinc futures to cutting down of bets by participants, tracking weakness in base metals pack at the London Metal Exchange amid concerns over China's economy.

Zinc prices declined by Rs 3 per kg at the non-ferrous metal market due to reduced offtake by consuming industries. Traders attributed the fall in zinc prices to easing demand from consuming industries. In the national capital, zinc ingot declined by Rs 3 to Rs 100-106 per kg. Following are today's metal rates (in Rs per kg): Zinc ingot Rs 100-106, Nickel plate (4x4) Rs 823-828, gun metal scrap Rs 227, Bell metal scrap Rs 229, copper mixed scrap Rs 360, chadri deshi Rs 295. Lead ingot Rs 85, lead imported Rs 91, aluminium ingots Rs 158, aluminium sheet cutting Rs 154, aluminium wire scrap Rs 154 and aluminium utensils scrap Rs 152.

NCDEX - WEEKLY MARKET REVIEW
The recent rains in Gujarat and Rajasthan and lower stocks in international market have boosted the prospects of jeera, the second largest exported spice from India. The near month jeera futures prices in Ncdex hovered around Rs 163 per kg on Saturday. But the November and December futures prices are showing a higher price trend. The export demand going through a sluggish phase following reduced buying by China and Hanjin shipping company fiasco is expected to pick up in the months. ``Indian cumin is priced $200 lower than the stock in Syria and Turkey at $2500 per tonne but there are no takers with China going slow on purchase. The bankruptcy of Hanjin shipping company also led to delay in shipments affecting exports,’’ said Dipak Parikh, partner of Kanu Krishna Corporation. The political turmoil in Syria and the depletion of stocks in that country and Turkey, which are the two major producers of cumin after India, could lead to a shift in demand to India in the coming months, according to Religare Broking. The falling rupee is also expected to benefit the Indian exports in the medium term. The cumin exports at 41,000 tonnes valued at Rs 637.50 crore for three months to June 2016 had shown 55% increase in quantity and 50% rise in value from a year ago. increase in quantity and 50% rise in value from a year ago. ``The good rains in Gujarat region are good for cumin, the sowing of which will commence this month. Since the situation is not ideal for coriander, another spice cultivated in these regions, farmers may shift to cumin,’’ said KrishnakumarMenon, head of procurement of Eastern Condiments Pvt. Ltd., a major curry masala company.


ICE cotton closed lower last week on waning fears of crop damage due to Hurricane Matthew pressured speculators to continue selling their positions. Moreover, Harvest pressure in all key cotton-producing regions in the United States also weighed down prices. Weekly export sales report from the U.S. Department of Agriculture showed net upland sales totaled 158,900 running bales for the week ended Sept. 29, up 73 percent from the previous week, but down 18 percent from the prior four-week average. The U.S. cotton harvest has just begun with 6% of cotton harvested as of the week ended Sept. 18 compared to a five-year average of 7%. The U.S. Department of Agriculture's weekly crop progress report released showed that 49% of cotton crops in the US were in good-excellence condition, up marginally from 48 percent a week ago. Cotton complex prices traded mixed last week as new season cotton started to arrive in some parts of India. Moreover, the sudden spell of heavy rains in cotton-growing regions of Maharashtra, Gujarat, Telangana and Karnataka during the last 10 days may lift the yield by an additional 10 %, as per officials of the Nagpur based Central Institute for Cotton Research. Last week, NCDEX Kapas for Apr’17 closed lower by 2.22% while MCX Oct’16 cotton closed higher by 0.30%. As per, the Cotton Association of India , the apex trade body of the fibre crop, The trade body has retained the cotton crop estimates for the year 2016-17 season at 336 lakh bales of 170 kg each. The projected balance sheet drawn by CAI estimated total cotton supply for the cotton season 2016-17 at 398 lakh bales, while the domestic consumption is estimated at 309 lakh bales thus leaving an available surplus of 89 lakhbales.


? JEERA
Jeera futures closed lower during the last week due to lower domestic and export demand. NCDEX Oct’16 Jeera closed 3.55% down to close at Rs 16,715 per quintal. The physical stocks are dwindling with the stockists but anticipation of good crop in the next season pressurizes the prices in the futures market. According to the trade sources, jeera exports may have raise by 29% to 58,000 tonnes in Apr-Aug compared to last year figure of 45,000 tonnes. According Department of commerce data, the exports of Jeera in thefirst four months Apr-Jun of 2016-17 is at 51,904 tonnes, higher by 61.5% compared to last year same time. The exports of jeera during July 2016 decreases 20% m/m to 7,881 tonnes but increase y/y by 27.3%. As per 4thadvance estimate of Gujarat State for 2015-16, production is pegged at 2.38 lt compared to 1.97 lt in 2014-15. In 2013-14, production was 3.46 lt.


? TURMERIC
Turmeric futures closed lower last week on forecast of dry weather across turmeric growing states during the second half of October, which may be favorable for crop maturing and higher yield. Turmeric Oct’16 delivery contract on NCDEX closed 3.84% down to settle at Rs 6,910 per quintal. Lowering export demand in recent months is pressurizing prices The prices of turmeric are moving sideways to down due to mixed fundamentals of good sowing acreage coupled with declining supplies and forecast of higher rains in the state of Telangana. The demand from the industrial buyers will support the prices just before new season harvesting. On the export front, country exported about 42.923 tonnes of turmeric during April-July period up by 34,5% compared last year, as per department of commerce data. Turmeric acreage in Telangana as on 28 Sep was up 12% at 46,000 hectares as compared to 41,000 hectares last year. Sowing of turmeric is over in 95% of normal area and up by 107 % of normal sowing area.



? REFINED SOYA
Refined soy oil closed lower last week due to expectation of sufficient stocks in the physical market as import duty cut by the government. The most active Ref Soy oil Oct’16 expiry contract closed 0.41% lower last week. Recently, government increases the tariff value of crude soya oil to $827/tonnes or 1.22% compared to previous fortnight. Government fixes the tariff value every fortnight. As per SEA data, India's edible oil imports fell 8.4% to 1.25 mt in August, while cumulative imports in the first 10 months of the current oil rose 4.0% to 12.04 mt. India Aug crude soyoil import 333,599 tonnes, lower by 18 % compared to 406,116 tonnes year ago. Earlier, India has cut import taxes on both crude palm oil and refined edible oils by 5% points to 7.5 and 15 % respectively.

? SOYABEAN
Soybean futures closed lower on week due to reports of new season soybean crop from MP, Rajasthan and Maharashtra. The most-active Oct’16 delivery contract closed 0.31% down to settle at Rs. 3,225 per quintal. As per Soybean Processors Association of India recent survey across Madhya Pradesh, Maharashtra, and Rajasthan India's soybean production in 2016-17 Jul-Jun to 10.9 mt, up 58% from the last year. Soybean production is estimated higher in all the three states, which account for over 80% of the country's output.

U.S. soybean fell as U.S. farmers are expected to boost the pace of harvesting on forecasts of dry weather in the Midwest. Moreover, Brazil's CONAB forecast that 2016/17 soybean production in the country, a key exporter, will rise to between 101.9 million and 104 mt from 95.4 mt in the previous marketing year. The USDA reported weekly soybean export sales rose to 2.180 mt from 1.693 mt a week ago, well above forecasts for 1.2 mt to 1.5 mt.


? SUGAR
Sugar prices in India depend to a large extent on supply from the leading producer, Maharashtra, but the state government and the Indian Sugar Mills Association differ widely in the estimates of this year’s output, making forecasting prices hazardous. ISMA has pegged drought ridden Maharashtra’s 2016­17 sugar production at 62.7 lakh tonnes while the state’s sugar commissionerate expects output of just 50.28 lakh tonnes. In 2015-16, Maharashtra had produced 84.3 lakh tonnes of sugar and India’s total output was 251 lakh tonnes. According to ISMA’s first advance estimate for 2016­17, India’s sugar output is expected to decline 7% to 233.7 lakh tonnes this year. However, the fall will be nearly 12% to 221.3 lakh tonnes if the state government’s estimate is taken into consideration.



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