Commodity Research Report Ways2Capital 11 January 2016


Posted January 11, 2016 by ways2capital

U.S. payrolls surged in December and the job count for the prior two months was revised sharply higher, showing the economy on solid ground despite a troubling international backdrop.

 
MCX - WEEKLY NEWS LETTERS
INTERNATIONAL NEWS
U.S. payrolls surged in December and the job count for the prior two months was revised sharply higher, showing the economy on solid ground despite a troubling international backdrop. Nonfarm payrolls increased by 292,000 last month, the Labor Department said on Friday, as hiring got a boost from unseasonably warm weather. The unemployment rate held steady at a 7-1/2-year low of 5 percent even as more people entered the labor force, a sign of confidence in the job market.
Chinese commodity funds see further falls in metal prices in 2016, but are eyeing potential buying opportunities in agricultural products and oil as beaten-down prices near the bottom of the cycle, fund sources said. As turmoil around China's falling yuan hits world share markets, many fund managers expect further weakness in the currency, and plan to increase their hedging or start taking out currency protection for the first time.
The US Dollar Index strengthened by 0.3 percent in the last week owing to the robust release of Non-Farm Employment Change and unemployment rate data from the nation. Moreover, concerns with respect to the six-month selling ban for major stakeholders that was expected to expire in the last week and had sparked heavy selling thereby keeping the Chinese markets volatile Chinese volatility continued to subside.

✍ BULLION
On the MCX, gold prices rose by 4.1 percent last week to close at Rs.25982 per 10 gms. A wave of risk aversion due to growth worries in China and rising tensions in the Middle East triggered demand for the metal, despite the stronger U.S. dollar. A 7 percent slide in China stocks on Monday sparked by weak economic data rekindled worries over global growth and sent European and U.S. stocks diving.
Amid a weakening global trend and profit-booking by speculators, gold futures traded lower by Rs 127 at Rs 25,973 per 10 gram . Gold for delivery in February contract eased Rs 127, or 0.49% to Rs 25,973 per 10 gram in a business turnover of 423 lots at the Multi Commodity Exchange. In a similar fashion, the metal for delivery in far-month April was trading down Rs 127, or 0.48% to Rs 26,100 per 10 gram in 3 lots. Analysts said the fall in gold futures was mostly in tune with a weak trend overseas where the precious metal pared its best weekly advance since August as global markets rallied after China reassured investors by refraining from a further cut in its exchange rate, halting an equity slump that had seen US shares post their worst ever four-day start to the year. Meanwhile, gold prices fell 0.50% to $1,103.53 an ounce in Singapore. Prices are up 4% this week. Gold climbed above $1,100 an ounce for the first time in nine weeks on Thursday as the dollar fell and investors channeled money into safer assets for a fourth straight day after worries about the Chinese economy hit global stocks. Shares on major exchanges fell for a sixth consecutive day while crude oil prices bounced back from multiyear lows as volatile markets digested another move lower in the yuan and China's efforts to stabilize its sinking stock market. "Gold's strength is probably going to be relatively short term, but there is an upside risk to gold, if the view that China is going to pull the whole world into recession becomes stronger," Citigroup metals strategist David Wilson said. "But if the U.S. and Europe continue to grow, gold will go weaker ... Chinese stock markets had got massively over inflated because a lot of money piled into it and now people have come back to reality."Spot gold rose to a nine-week high of $1,109.94 an ounce at one stage and was up 1.3% at $1,108.45 an ounce at 2:03 p.m. EST (1903 GMT). U.S. gold futures settled up 1.5 percent at $1,107.80 an ounce.
Taking weak cues from overseas markets, silver prices dropped by Rs 285 to Rs 34,246 per kg in futures trade .as participants cut down their bets. Moreover, profit-booking at prevailing levels by speculators weighed on silver prices. At the Multi Commodity Exchange, silver for delivery in March was trading lower by Rs 285, or 0.83%, to Rs 34,246 per kg, in a business turnover of 808 lots. Similarly, the white metal for delivery in far-month May declined by Rs 262, or 0.75%, to Rs 34,649 per kg, in a business volume of 15 lots. In the international market, silver fell 0.66% to $14.21 an ounce in Singapore today. Traders said the fall in silver prices at futures trade was largely in tandem with a weak trend in precious metals in global markets profit-booking by speculators.

✍ ENERGY
On the MCX, oil prices declined by 10 percent to close at Rs.2244 per barrel Global oil benchmark Brent and U.S. crude futures fell to nearly $32 a barrel on Thursday, their lowest since at least 2004, after another free fall in the Chinese stock market rattled investors already concerned by the world glut in oil. U.S. government data on Wednesday showed a 10.6 million-barrel surge in gasoline supplies, the biggest weekly build since 1993, rattling investors already concerned by near-record production and massive stockpiles around the world. Relations between Saudi Arabia and Iran collapsed in acrimony last week after the Kingdom's execution of a Shi'ite cleric set off a storm of protests in Tehran.
The Indian basket of crude oils dived sharply to the $30 a barrel mark as sweet grade UK Brent prices fell on Thursday's trade to levels last seen in 2004, pulled down this time by a falling Chinese currency and a second emergency halt in China's stock trading this week that spooked Asian markets. The Indian basket, composed of 73% sour grade Dubai and Oman crudes and the rest by Brent, closed at $31.33 per barrel of 159 litres on Wednesday, falling from $32.51 on the previous trading day The US crude output increased unexpectedly last week to 9.219 million barrels a day according to the US Energy Information Agency. Adding to investors' worries was the lack of signs that US shale oil producers would start to cut production in face of the plunging prices. The West Texas Intermediate (WTI) for February delivery moved down $2 to settle at $33.97 a barrel on the New York Mercantile Exchange, the lowest close since December 2008. Brent crude for February delivery decreased $2.19 to close at $34.23 a barrel on the London ICE Futures Exchange, the lowest close since June 2004. China further depreciated the yuan on Thursday, leading to regional currencies and stock markets tumbling as investors feared China's moves could trigger competitive currency devaluations from trading partners. The benchmark Shanghai Composite Index declined by 7.32 %, which led to a halt in trading, as the circuit breaker mechanism was triggered. Commodity prices, too, plunged as the economy of the world's largest consumer struggled. China's service activity grew at a slower pace in December, fuelling worries about a slowdown in the world's second biggest oil consuming economy. Meanwhile, Prime Minister Narendra Modi met here on Tuesday with global oil and gas experts to discuss ways of boosting investments in the exploration and skill development at a time of low oil prices. Among the foreign invitees to the meeting were British oil major BP's chief executive Bob Dudley, International Energy Agency (IEA) executive director Fatih Birol, and Royal Dutch Shell's director (Projects) Harry Brekelmans.The discussions focused, among other things, on subjects such as increasing the share of gas in India's energy mix, fresh investment in oil and gas exploration in India, regulatory frameworks, international acquisition of oil and gas assets, the Prime Minister's Office said.

✍ COPPER
LME Copper prices plunged by 4.7 percent last week to close at $4485 per tonne as the People's Bank of China set the Yuan’s official midpoint rate at its weakest level in four and a half years, signaling that the economy is weaker than expected. China’s stock market tumbled by 7 percent and trading was halted for the second day this week as devaluation in the yuan raised further questions about the Chinese economy and increased concerns over capital flight. Further, Copper production in Peru, the world's third-largest supplier, surged 37 percent in November. The country is poised to become the world's second-biggest copper producer this year. Also, data showed the country's forex reserves dropped by nearly $108 billion in December, the biggest decline on record bringing total holdings to $3.3 trillion, lowest level in three years. Besides, State Reserve Bureau, which is in charge of building the country’s strategic reserves of commodities is likely to buy up to 150,000 tonnes of copper to support falling prices
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Last Updated January 11, 2016