Commodity Research Report Ways2Capital 18 Dec 2017

Gold prices clung to earlier gains and were poised for their first weekly gain in four weeks on Friday, withstanding pressure

Gold prices clung to earlier gains and were poised for their first weekly gain in four weeks on Friday, withstanding pressure from strong equities markets on continued support from this week's interest rate rise by the Federal Reserve. Higher interest rates usually push gold lower because they raise bond yields, reducing the appeal of non-yielding bullion, and boost the dollar, making gold more expensive for holders of other currencies. But markets had priced in Wednesday's rise and the dollar and bond yields fell after the Fed kept its outlook for three rate rises next year unchanged and said proposed U.S. tax cuts would not significantly spur growth. U.S. inflation remained weak, which Chicago Fed President Charles Evans said on Friday undermined the case for rate rises. The dollar recouped some losses as Republican senators worked to resolve disagreements on the tax reform. Major stock indexes hit record highs.

Among base metals complex, LME Nickel prices traded higher on Monday after the Chinese government slashed the export duties over some steel products which would in return increase demand for the metal. China will cut export taxes on some steel products and fertilisers and ditch those for sales abroad of steel wire, rod and bars from Jan. 1, the Ministry of Finance said on Friday. Recently, INSG report showed the widening of deficit in global nickel market to 65,700 tonnes in the first nine months of the year, from 47,400 tonnes, in the same period of 2016. As per CFTC, Hedge funds and money managers cut their net long position in COMEX copper contracts in the week to Dec. 12. However in Zinc due to ample availability of supply spread between cash & 3 month forward contract has fallen to zero from above $90/ton in October which was the highest since Dec 2006. Aluminum was getting a second boost from separate China data showing production for November slumped to 2.35 million tonnes, which was down 7.7 percent from October and the lowest absolute level since February this year. Copper prices scaled three-week highs on Friday after the New York open and as expectations of strong demand in top consumer China were reinforced by data showing firm industrial activity. Traders said rising stock market indices on Wall Street had boosted sentiment and sparked a wave of buying on industrial metals markets

Crude oil prices hovered near to Friday’s levels as lack of new price driver casts the shadow over the prices. On Friday, baker Hughes showed the decline in US active rig by 4 to 747 for the first time in six weeks. In the major development in OPEC nations, Nigeria’s PENGASSAN union has threatened to go on strike from Monday after talks aimed at resolving a dispute with domestic oil and gas companies reached a deadlock. In Nigeria, Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), which mainly works in the upstream oil industry, is clashing with the companies over the laying off of union members. And has threatened os Saturday to go on strike from Monday. Separately, Forties pipeline pipeline, which carries about a one fourth of all North Sea crude output and about one third of Britain's offshore gas production, has been closed since last week, following the discovery of a small crack in part of the system onshore in Scotland. As per CFTC data, the speculator group cut its combined futures and options position in New York and London by 7,542 contracts to 435,200 during the period. The group cut its gross long positions to 435,764 from 439,751. The group cut its short positions to 44,890 from 47,320.
NG prices remained negative on Friday as prices went lower around 2.68% in International markets and went down by 3.3% at its closing in MCX futures market. ? As per CFTC, U.S. gas speculators cut their net long positions to the least since August 2016 on expectations supplies will be adequate this winter with storage near normal levels, output at record highs and warmer than seasonal winter forecasts.

MCX LEAD has forming head & shoulder pattern breakout which suggests positive trend for the short term. Above the level of 163.30 Price expected to provide fuel to the rally going ahead. Daily RSI (14) has given a trendline breakout which indicates change in momentum. Daily MACD has entered in a bullish crossover. Based on the above analysis, we expect a smart rally in the MCX LEAD price over the short period of time.
BUY LEAD DEC ABOVE 163.30 TGT 163.30 SL 161.5

MCX Silver price has closed in the green at the end of last trading session. Comex Silver has closed in the green for the third consecutive sessions. In addition, Comex Silver price has moved back above $16 mark. On the daily chart of Comex Silver, momentum indicator RSI (14) is seen to have reversed from the oversold zone and currently in a bullish crossover. MACD is in bullish crossover. Based on the above technical set up and indicators, we expect a pullback in MCX Silver price.
BUY SILVER MAR ABOVE 37500 TGT 38000 SL 37200

NCDEX Jan Jeera falls for the second consecutive day on Friday as market participants initiated fresh selling. For the December contract NCDEX reported record deliveries allocations of 3,633 tonnes on exchange platform in first three days of staggered delivery period. The market is also cautious after it touched all time higher this month. Moreover, good progress of jeera sowing in Gujarat also pressurizes prices. In Gujarat, jeera acreage up by 37.4% to 3.1 lakh ha this year compared to 2.3 lakh ha last year as on 11th Dec. As per government data, Jeera exports during first six month of FY 2017/18 (Apr-Sep) is 77,827 tonnes, up 8.4% compared to last year exports volume for the same period. India's jeera exports in Sep increase 110% on year to 14,742 tn. Jeera arrivals for the first 15 days of Dec down by 50% to 1,985 tonnes on year due to tight supplies and lower stocks.Turmeric Apr contract closed lower on Friday due to fresh selling but prices improved on week due to firm physical demand and expectation of improved up-country demand from the new season. The supplies have improved during last one month due to government auctions and lower exports data. The export of turmeric is down by 15.2% to 56,900 tonnes for the first 6 month of FY 2017/18 compared to last years’ exports. The arrivals have been higher during first 15 days in December this year to 13,033 tonnes compared to 5,820 tonnes last year same month according to Agmarknet data.

Mustard Jan futures closed higher on Friday but 1% down on week. Currently the prices looking move according to the winter demand but reports of higher inventories with the traders and farmers keep pressure on prices. According to MOPA, mustard stock with Farmers & Processors as on 30th Nov’17 was at 13 lakh tonnes. Mills across the country crushed 475,000 tn of the oilseed in November, up nearly 6% on month. The acreage of mustard was down 7% till last week at 61 lakh ha, as per latest rabi sowing report by the government. Rajasthan is the largest mustard growing state but the sowing pace is slower than last year at 20.6 lakh ha Vs 27.7 lakh ha.NCDEX Soybean futures closed higher on Friday on fresh buying by the market participants on lower level buying and anticipation of improved demand but down for the week on higher stocks with the mills. The arrivals have been lower in first half of December compared to previous 15 days. As per, Agmarknet, 3.72 lakh tonnes of soybean arrived in physical market in December against close to 5 last year for the same time period. Moreover, in the second half of October about 7.41 lakh tonnes arrived in the market. SOPA increased its meal exports estimates for 2017/18 as government has increased export incentives by 2% to for all meals. According to SOPA,

Soymeal exports from the country in 2017-18 (Oct-Sep) are seen rising to around 20 lakh tn from previous estimate of 15 lakh tn due to a recent rise in export incentives. US Soybean futures closed lower on Friday supported by forecasts of rain in Argentina and higher production forecast in 2018. There is expectation for rain this weekend in dry areas of Argentina, the world's top soymeal exporter. The 2017/18 Brazilian soybean crop is now estimated at 109.1 mt, which is up from the 107.5 mt estimated in November. US soybean planted acreage for 2018 is expected to hit 91.4 million acres, according to Informa analysts.

Chana Jan futures jumped higher on Friday on short covering on reports of higher stocks and improved sowing progress. As per government data, India imported about 4.78 lakh tonnes of chana during April-Sep, up by 430% compared the last year imports. As per government sowing data, area under the chana crop across the country was up 13.7% on year at 96.23 lakh ha as on last week. Area under Chana exceeds 90 lakh ha for the second consecutive year. Last year area was close to 99 lakh ha. MP, Maharashtra, Rajasthan and Karnataka exceed normal sowing area this season. The NCDEX have imposed a special margin of 5% on the sell side to support falling prices.
MCX Dec Cotton rises 2.76% on week tracking lower arrivals and expectation of fall in domestic output due to pink bollworm attacks in some states. Moreover, higher bonus in Gujarat and increase in consumption by the mills is also supporting prices. As per Cotton Advisory Board, demand from textile mills is likely to be 315 lakh bales this season as against 288.86 lakh bales last season, while exports might go up to 67 lakh bales as against 58.21 lakh bales last season. According to industry sources, cotton exports to Pakistan might be higher this year. ICE cotton rose on Friday boosted by technical buying, as the March contract touched an all-time high and notched an eighth consecutive weekly gain. USDA monthly crop supply and demand report was bullish it raised its U.S. cotton production forecast for 2017-18 by 63,000 bales and exports estimates by 300,000 bales compared with its outlook last month, and projecting ending stocks at 5.8 million bales as against 6.1 million bales seen in November.

Market is continuously making higher lows forming ascending triangle formation indicating positive movement in upcoming session. It is facing important resistance level at Rs.3913 above the level we believe that market can touch the level of Rs.3980 & Rs.4000. Traders can follow the buy on dips strategy. Momentum still positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices for the GUARSEED.

Refined Soy Oil Jan contract jumped higher tracking higher spot prices. However, the prices have been traded sideways during last week due to higher stocks due to improved domestic crushing and higher imports in November. For the second half of December, government further cut the base import price of soy oil, by $20 per tonnes. According to data released by the Solvent Extractors' Association, India vegetable oil imports rose around 6% on year to 12.5 lakh tonnes in November. Soyoil imports surged by 66.7% in November to 2.74 lt compared to 1.64 lt last year.
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