Commodity Research Report Ways2Capital 12 December 2016

Gold prices touched fresh 10-month lows on Friday and the precious metal posted its fifth straight weekly decline as expectations for higher U.S

Gold prices touched fresh 10-month lows on Friday and the precious metal posted its fifth straight weekly decline as expectations for higher U.S. interest rates continued to weigh. Gold for February delivery settled down 0.94% at $1,161.4 on the Comex division of the New York Mercantile Exchange. It was the metals lowest close since February 5. For the week, gold was down 1.34%. The dollar rose on Friday amid widespread expectations that the Federal Reserve will hike interest rates at the conclusion of its policy meeting on Wednesday. Investors are pricing in a 100% chance of an increase at the meeting, according to federal funds futures tracked's Fed Rate Monitor Tool.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.48% to 101.60 late Friday. For the week, the index was up 0.75%. Higher rates boost the dollar by making the currency more attractive to yield-seeking investors. Both a strong dollar and higher interest rates are typically bearish for gold, which is denominated in dollars and struggles to compete with yield-bearing assets when borrowing costs rise. Gold prices have slumped since Donald Trump was elected president as rising U.S. bond yields and a rally in stocks markets have damped its appeal. Elsewhere in metals trading, silver for March delivery was down 0.94% at $16.93 a troy ounce, while copper for March delivery settled at $2.65 a pound. Platinum fell 2.3% to $916.1 and palladium ended at $731.0 an ounce, after falling to its lowest since November 18 in the previous session. In the week ahead, investors will be looking for possible signals from the Fed on the pace of rate hikes next year and market watchers will be awaiting a number of U.S. economic reports, including figures on retail sales and inflation for fresh signs on how the economy is performing in the final quarter. Ahead of the coming week, has compiled a list of these and other significant events likely to affect the markets.
Gold retreated into the red on Thursday after the dollar rebounded on the back of a decision by the European Central Bank to extend monthly asset purchases until next December albeit at a lower monthly level. Gold turned lower as the market focused on the central bank's move to extend its quantitative easing program until the end of 2017, beyond the six-month extension expected. dollar index .DXY rallied 1 percent, making dollar-denominated gold more expensive for holders of other currencies. Spot gold XAU= was down 0.3 percent at $ 1,170.40 an ounce by 2:31 p.m. EST , and U.S. gold futures GCcv1 settled down 0.4 percent at $ 1,172.40 per ounce. "If the ECB has the ability to trigger euro-dollar EUR= weakness again, and it breaks under the key 104.58-105 level, then you'll get the next phase of a dollar rally, which will be painful for gold," said Georgette Boele, ABN AMRO commodity strategist in Amsterdam. The euro gave up all its gains versus the dollar after the ECB move, falling around 1.4 percent. Also weighing on gold were increased expectations the U.S. Federal Reserve will increase interest rates at its policy meeting next week, as higher U.S. rates raise the opportunity cost of holding non-yielding bullion. Interest rates futures implied traders saw a 97 percent chance the Fed would raise rates at its policy meeting next Tuesday and Wednesday, "As we head into the FOMC, it is certain that the Fed will raise rates this time. I believe this is mostly priced into gold. We might still see some reaction and the recent low of $ 1,157 may be revisited again," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central. Holdings of SPDR Gold Trust GLD , the world's largest gold-backed exchange-traded fund , dropped 0.72 percent to 863.67 tonnes on Wednesday from a day earlier. Holdings have fallen more than 8 percent since November. "The mounting bleed of gold ETF outflows highlights the weakness that has proliferated for gold since the U.S. elections," said RBC Capital Markets in a note. "Going forward, we think ETF holdings should stabilize with prices." Silver XAG= fell 0.8 percent at $16.96 an ounce after rising more than 2 percent in the previous session. Platinum XPT= rose 0.2 percent at $938.25, while palladium XPD= rose 0.7 percent at $737.75 after touching a low of $713.97, the weakest since Nov. 18.

Oil prices climbed on Friday ahead of a weekend meeting of the Organization of the Petroleum Exporting Countries and non-OPEC producers to finalize the details of a planned output cut.U.S. crude oil settled up 65 cents or 1.28% at $51.49 a barrel from its previous close on the New York Mercantile Exchange. Global benchmark Brent futures were at $54.36 a barrel, up 47 cents or 0.87% on London’s ICE Futures Exchange. Oil prices have climbed above $50 a barrel since OPEC agreed on its first production cut since 2008, aimed at reining in massive oversupply that has seen prices more than halve since mid-2014. The deal will see the group slash output by 1.2 million barrels per day from January 1. On Saturday, major oil producers reached agreement on a deal which will see non-OPEC members cut output by an additional 558,000 bpd. Of that, Russia will cut 300,000 bpd. This is short of the initial target of 600,000 bpd, but it is still the largest output cut by non-OPEC nations ever. While the output cut agreement has boosted oil prices, some remain skeptical on the ability of major producers to adhere to output limits. Meanwhile, Reuters reported Sunday that oil production by Saudi Arabia rose to a new record high in November. OPEC and Russia have already reported that output hit record highs since the deal was announced, adding to fears that the global supply overhang could persist well into 2017. Some analysts have also warned that the cuts are likely to cause other producers, particularly U.S. shale drillers, to quickly ramp up output as prices rise.In the week ahead, markets will focus their attention on the implementation and impact of the OPEC agreement. Traders will also be watching U.S. stockpile data on Tuesday and Wednesday for fresh supply-and-demand signals. Ahead of the coming week, has compiled a list of these and other significant events likely to affect the markets.
Oil prices extended gains on Friday, buoyed by growing optimism that non-OPEC producers might agree to cut output following a cartel agreement to limit production. NYMEX crude for January delivery CLc1 was up 17 cents at $51.01 a barrel by 0039 GMT, after closing up $1.07 on Thursday. However, the contract is set for a weekly decline of around 1 percent. London Brent crude for February delivery LCOc1 was yet to trade after settling up 89 cents at $53.89 a barrel on Thursday following two days of declines. Oil producers will meet in Vienna on Saturday to see if non-OPEC countries will cut production to reduce a global supply glut that has pressured prices for more than two years. has agreed to slash production by 1.2 million bpd in the first half of 2017, a deal that bolstered crude futures despite doubts over whether the amount was enough and whether the cuts would be effectively implemented. which is not an OPEC member, has signalled it was ready to cut production by 300,000 bpd and on Thursday Azerbaijan said it would come to Vienna armed with proposals for its own reduction.
U.S. West Texas Intermediate crude rose early in the day and began to pare gains in the late afternoon, settling at $ 51.79 a barrel, up 11 cents or 0.21 percent, before retreating to as low as $ 51.11 a barrel. Brent crude settled at $54.94 a barrel, up 48 cents - or 0.88 percent - before retreating to $ 54.22 a barrel. Monday's retreat indicated a potential halt to the rally that drove the market up as much as 19 percent since the Organization of the Petroleum Exporting Countries' agreement was struck on Wednesday. Last week's 12.2 percent increase was the largest one-week rise since February 2011. The market fell as investors shifted their focus to rising drilling, . "The Brent-WTI spread has blown out, and a lot of that has to do not only with shale but with the idea that there would be more drilling," he said. U.S. drilling rigs increased on Friday, increasing sentiment that shale drilling would offset potential cuts from other producers. After OPEC agreed to curb production by 1.2 million barrels per day from January, eyes have now turned to a meeting this weekend between OPEC and non-OPEC producers to expand the deal. The market remained leary that cuts by non-OPEC members, in tandem with the OPEC cuts, would be sufficient. Saudi Arabia said Monday afternoon that it would cut its official selling prices to Asia, indicating that it would continue to strive to maintain market share. data from the InterContinental Exchange on Monday showed investors had raised net long positions on Brent to the highest level in four weeks. Non-OPEC producers are expected to agree to add an output cut of 600,000 bpd in Vienna on Dec. 10. remain skeptical that Non-OPEC producers will line up to pledge their own reductions when OPEC's announcement last week already largely took responsibility for rebalancing the market," said Tim Evans, energy futures specialist with Citigroup in New York. "In our view, the rally in prices represents an economic call for more production, not more cuts." Transneft, Russia's pipeline monopoly, suggested on Monday a cut to oil output could begin in March. which was granted an output rise as part of the OPEC deal as it recovers production curbed by sanctions, will also attend the meeting. even as it auctioned off leases in the deepwater Gulf of Mexico, which will pave the way for future production increases.

Buoyed by a firm global trend and increased domestic demand, copper futures traded 1.22 per cent higher at Rs. 397.30 per kg as speculators widened their bets. At the Multi Commodity Exchange, copper for delivery in February next year was trading Rs. 4.80, or 1.22 per cent higher, at Rs. 397.30 per kg, in a business volume of 1,986 lots. Similarly, the metal for delivery in far-month April was up by Rs 4.60, or 1.16 per cent, to Rs 401.10 per kg in 10 lots. Analysts said firming trend in base metals at the London Metal Exchange where the base metals pack strengthened afters China's imports jumped the most in more than two years on strong demand for raw materials, influenced metal's futures. Globally, copper for delivery in three months climbed 1 per cent at the London Metal Exchange. Copper futures traded 0.16 per cent lower at Rs 404.50 as speculators cut down their positions at prevailing levels amid a weak trend overseas. In futures trading at Multi Commodity Exchange, copper for delivery in far-month April fell 65 paise, or 0.16 per cent at Rs 404.50 per kg, in a business turnover of 3 lots. Similarly, the metal for February was trading down 55 paise, or 0.14 per cent at Rs 400.45 per kg in 757 lots. Analysts attributed the fall in copper futures to trimming of positions coupled with weak trend in base metals at the London Metal Exchange. Meanwhile, copper for three-month delivery fell 0.4 per cent at the LME.

Nickel prices rose 1.78 per cent to Rs 765.20 per kg in futures trade on Friday as speculators enlarged positions on positive cues from global markets. Besides, increased demand from alloy-makers in the domestic spot market, supported the uptrend. At the Multi Commodity Exchange, nickel for delivery in current month was trading higher by Rs 13.40, or 1.78 per cent, to Rs 765.20 per kg, in a business turnover of 1,699 lots. Similarly, the metal for delivery in January rose by Rs 13.50, or 1.78 per cent, to Rs 770.60 per kg in 56 lots. Market analysts attributed the rise in nickel futures to a firm trend in industrial metals overseas as China's imports jumped the most in more than two years on strong demand for raw materials and rising demand from alloy-makers at the domestic spot markets. Nickel prices rose 0.14 per cent to Rs 792 per kg in futures market after speculators widened bets, tracking a firm trend in the spot market on increased demand from alloy makers. However, a weak trend in base metals at the London Metal Exchange , capped the gains. At the Multi Commodity Exchange, nickel for delivery in January next year gained Rs 1.10 or 0.14 per cent to Rs 792 per kg in a business turnover of six lots. In a similar manner, the metal for delivery in December rose 8 paise, or 0.10 per cent to Rs 786.80 per kg in 430 lots. Analysts said increased domestic demand from alloy makers supported uptrend in nickel futures here but weakness in industrial metals at the LME, limited the gains.

Zinc futures traded 0.68 per cent lower at Rs. 189.20 per kg on Wednesday after speculators trimmed positions, tracking a weak global trend. In futures trading at Multi Commodity Exchange, zinc for delivery in January declined Rs. 1.30, or 0.68 per cent, to Rs. 189.20 per kg. It clocked a business turnover of five lots. On similar lines, the metal for delivery in December softened by Rs 1.25, or 0.66 per cent, to Rs 188.80 per kg in 459 lots. Market analysts said weakness in zinc futures trade was mostly due to a falling trend in base metals pack amid profit-taking by speculators at prevailing level.

IMD sets up renewed watch for another cyclone in Bay of Bengal the build-up in the Bay of Bengal over the past three to four days is now set to culminate in the formation of a cyclone, the third in the North-East monsoon season. A preparatory low-pressure area has been wallowing over the South Andaman Sea and adjoining South-East Bay of Bengal for sometime now. On Tuesday evening it intensified into a depression, and was located 1,320 km south-south-east of Visakhapatnam; 1,360 km south-south-east of Gopalpur Odisha; and 210 km west-south-west of Car Nicobar . It has started showing signs of gaining
traction, the India Met Department said, and will do so markedly over the next three days while growing into a deep depression and a cyclonic storm. The would-be cyclone may initially move in a west-northwest direction (looking at the Tamil Nadu coast) and later to the northwest (with an eye on Andhra Pradesh). The European Centre for Medium Range Weather Forecasts agrees with the outlook for steady intensification of the depression. It may become a full-blooded cyclone by Friday.

Soymeal exports surge 104% in Nov Export of Soybean meal and its other value added products in November have recorded an increase of 104 per cent, compared to last year. According to the Soybean Processors Association of India, during November 2016, the export of soybean meal and other added products was recorded at 61,003 tons, against 29,801 tons in November 2015. On a financial year basis, export from April-November 2016 was 1,55,874 tons, against 2,73,433 tons last year; a drop of 43 per cent. Our Correspondent During current Oil year, (October – September), total exports during October 2016 to November, 2016 was pegged at 80,142 tons as against 71,905 tons last year, showing an increase by 11.45%.

SOPA says India soymeal exports up 104% on yr in Nov India's soymeal exports rose 104% on year to 61,003 tn in November, according to a release from the Soybean Processors Association of India. In November last year, the country had exported 29,801 tn of soymeal. Soymeal prices in India have fallen, making these attractive for traditional buyers, said a SOPA official. Earlier, such buyers had shifted to cheaper oilmeal from Latin American countries. The soymeal export
numbers include value-added products such as soy chunks, granules, nuggets, and flour. For Apr-Nov, soymeal exports are estimated at 155,874 tn, down from 273,433 tn in the year-ago period, the release said. In November, Japan was the major importer of Indian soymeal, followed by Myanmar and Sri Lanka. While Japan bought 14,543 tn, Myanmar imported 8,083 tn, and Sri Lanka purchased 7,435 tn during the month, according to the release.

Sugar Futures closed higher on lower level buying by the market participants. However, good sugar productions this sugar season coupled with less demand from the stockists capped further gains. The mostactive December sugar contract closed 0.26% higher to settle at 3,423 per quintal. Sugar production in India has increased marginally this season due to early crushing in states like Uttar Pradesh and Karnataka. As per ISMA, Indian sugar mills produced 2.74 mt of sugar between Oct. 1 and November. 30, up 17% compared to last year same period. During 2016-17 SS, the states of Maharashtra and Gujarat have produced lower sugar as compared to last year till the end of November 30 while Uttar Pradesh and Karnataka produce more sugar than the last year. The sugar despatched from sugar mills in first month of current season i.e. October 2016, was 20.64 lt as compared to 22.99 lt dispatched in October 2015, last year, down 2.35 lt. The country is likely to produce 23.4 mt sugar in 2016/17, down about 7% from a year earlier as back-to-back droughts ravaged cane crops in the top producing western state of Maharashtra. Moreover, government is looking to enhance domestic supplies by reduce import duty if the prices domestic market increase. Central government is exploring the option of lowering the 40% import duty on the sweetener in its raw form.

ICE raw sugar futures rebounded on Tuesday from a four-month low, buoyed by the Brazilian state-run oil company's decision to raise gasoline prices which may increase in Brazil. The increase in gasoline prices is positive for sugar as there will be more demand for ethanol in Brazil, encouraging mills there to direct more cane crush to ethanol instead of sugar. FCStone, a broker and Consultancy, cut its forecast for the global sugar supply deficit in the 2016/17 crop year (Oct-Sept) by 2.2 mt to 7.5 mt. It also estimate for global sugar demand in 2016/17 by 0.3% to 185.6 mt, which still represents a 1.6% increase over the volume seen a year
earlier. Moreover, speculators reduced their net long positions by 4,812 contracts for the eighth consecutive week in raw sugar contracts to 154,268 contracts in the week ended Nov 29 as per U.S CFTC. As per, the International Sugar Organization, world sugar production and demand will come back into balance in 2017-18, ending the run of deficits which has left inventories at a "critically low level" in the current season.

Soybean futures closed lower on Tuesday on anticipation of increase in supplies in the current month. There is an expectation that the arrivals of soybean in the domestic market keeping the supplies more than the demand. The most-active Dec’16 delivery contract closed 0.46% lower to settle at Rs. 3,062 per quintal. It is expectation that the peak arrivals will be observed during the month of December. SOPA has raised the estimate for 2016-17 (JulJun) soybean output in the country to 115 lt from 109 lt estimated earlier which is quite bearish for the domestic price.

CBOT soybean prices rose on Tuesday on report of round of export deals with China and concerns about dry weather in Argentina. Soybeans received additional support from a rally in the palm oil market. Soybean prices have been supported by strong demand for U.S. supplies led by China, in December. This week, private exporters reported to the USDA of 624,000 metric tons of soybeans for delivery to China and 378,000 tonnes of soybeans for delivery to unknown destinations during the 2016/2017 marketing year.

Mustard seed futures closed lower on Tuesday due to profit booking from the higher levels. However, winter demand by the industrial buyers and higher MSP limit the loss. The Dec’16 contract ended 0.23% lower to settle at Rs. 4,777/quintal. There are reports of good sowing progress in the state of Rajasthan, Uttar Pradesh and MP. As per agriculture ministry data, Country’s mustard acreage in the ongoing rabi season touched 61.7 lakh hectares as on Dec 02 up 13.6% from a year ago. The sowing operations were not affected much, as farmers had already bought the seeds. Rajasthan, the top mustard producing state, planted 27.3 lakh ha, up 17% from a year ago similarly acreage under mustard increase by 10% in Uttar Pradesh to 11 lh. In MP, mustard is sown in 6.35 lh, up 12% compared to last year. Govt increases mustard MSP by 350 rupees/100 kg to 3,700 rupees for FY16-17 which includes bonus of Rs.100 / quintals.

Refined soy oil futures closed little lower on Tuesday due to profit booking at higher levels however, increase in spot prices of soyoil and tariff values by the government capped further loss. The most active Ref Soy oil Dec’16 expiry contract closed 0.04% lower to settle at Rs. 736.5/10kg. The tariff value of crude soyoil was raised by $ 4 per tn to $876 which was the fifth increase in two and half month by the government. The tariff value of soy oil has been increase by about 6.5% since 15-Sep-16. As per SEA data, India October crude soyoil import 277,878 tonnes, lower by 31 % compared to 405,186 tonnes year ago while, India’s 2015/16 crude soyoil import 4.23 mt vs 2.99 mt – an increase of 41% y/y for the current oil year (Nov-Oct).

Jeera futures closed down for the second consecutive day mainly due to reports of good progress of Jeera sowing in Gujarat and drop in spot market prices on week uptake by the stockists. NCDEX Dec’16 Jeera closed 1.66% down to close at Rs 18,375 per quintal. Jeera sowing in Gujarat and Rajasthan have started. As on 28-Nov- 16, Gujarat farmers have planted jeera in 1,41,100 hectares, up by 122.5% compared to last year acreage. The stock position in NCDEX warehouse is at lower level compared to last year stocks. As on 02-Dec-2016, new Jeera stock position at NCDEX approved warehouses in Jodhpur and Unjha is totaled at 141
tonnes while it was 159 tonnes last week. Last year stocks were about 5,336 tonnes. According Department of commerce data, the exports of Jeera in thefirst six months (Apr-Sep) of 2016-17 is recorded at 70,809 tonnes, higher by 51% compared to same period last year. The exports of jeeraduring September 2016 down 26.3% m/m to 7,012 tonnes while it also down y/y by 8.84%.

Turmeric futures recovers on Tuesday tracking physical demand however, reports of good production from new season crops capped further rise. The prices have been supported over 7,200 levels as rains are expected in the Turmeric growing regions of Telangana. Turmeric Dec’16 delivery contract on NCDEX closed 2.06% lower to settle at Rs 7,218per quintal. The stock positions of Turmeric in the Exchange warehouses in the current season are only stock at Sangali while last year the stocks were stored in Duggirala, Erode and Nizamabad too. On the export front, country exported about 51,147 tonnes of turmeric during April-September period, up by 27% to 58,233 tonnes compared last year, as per government data. Expectations of increasing production in coming harvesting season and lowering export demand in recent months are putting pressure on turmeric prices at higher levels. Turmeric acreage in Telangana and Andhra Pradesh was higher this year as compared last year.

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