Commodity Weekly Report Ways2Capital 09 Feb 2015


Posted February 11, 2015 by ways2capital

GOLD PRICE CONTINUE TO SLUMP AS PRECIOUS METAL SELL OF Gold continued to fall in Friday afternoon London trading, trading at three-week lows after forecast-beating US jobs

 
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GOLD PRICE CONTINUE TO SLUMP AS PRECIOUS METAL SELL OF
Gold continued to fall in Friday afternoon London trading, trading at three-week lows after forecast-beating US jobs data resulted in a cross-complex sell-off. Spot gold was last at a price of $1,232.70/1,233.50 per ounce, down $31.90 and not far from its intraday low of $1,228.20, its cheapest since January 15.The US created 257,000 new jobs in January, surpassing the predicted 236,000, although the unemployment rate rose to 5.7 percent from 5.6 percent. As well, the change in non-farm payroll employment for November was revised to 423,000 from 353,000 and the change for December was revised to 329,000 from 252,000. Over the two-month period, employment gains were 147,000 higher than previously reported, setting up the strongest three-month gain in 17 years. Average hourly earnings increased 12 cents to $24.75 following a decrease of five cents in December. Over the year, average hourly earnings have risen 2.2 percent. Other metals also felt the force of a stronger dollar, which was last at 1.1315 against the euro. Silver was 60 cents lower in price at $16.61/16.66 per ounce after hitting a low of $16.56, platinum fell $21 to $1,224/1,229 and palladium was down $3 at $783/788.

Base metals outlook: Prices likely to improve
The global aluminium market will remain in deficit in 2015, although the scale of the supply shortfall is set to narrow from last year's level, as production growth rates are expected to remain high, especially in China, where output growth could reach nine per cent. The global economy remains riddled with uncertainties but, nevertheless, we remain confident that aluminium demand is set for another year of expansive growth, with 5.8 per cent forecast. That said, there are certainly some major headwinds in some regions - notably Europe, likely to keep Q1 of 2015 buying activity lean, at best.
Despite the steep fall in copper prices at the start of this year, fundamentally, this market is not in bad shape at all. And, if anything, the outlook is getting tighter, not looser. We are now forecasting a small supply deficit this year, as we believe demand remains fairly resilient and sub-$6,000/tonne prices will see the Chinese State Reserve Bureau stockpiling more metal. Meanwhile, the supply side is on course to underperform significantly, with 2015 already well on the way to being a record year in terms of unplanned disruptions. So, our view is that copper prices have become disconnected from the underlying fundamentals, which is not sustainable. Therefore, we are still looking for copper to end this year comfortably above the Q1 lows and well on the way to recovering the losses inflicted since mid-2014.
Like copper, lead is another market that has underperformed its fundamentals. Exchange stocks are low relative to consumption, destocking in China has left inventories lean there, and supply and demand are roughly balanced, overall. In addition, production cuts are emerging and the lower prices are making it more difficult for secondary producers to get scrap. So, as with copper, there is a case for lead pricing to improve during this year, and that is our baseline assumption.
The nickel market got too bullish, too soon, in 2014. In the end, the Indonesian ore export ban didn't improve the overall fundamentals anywhere near as much as the nickel bulls had hoped. But the supply-demand balance is still tightening, and 2015 is when that will really start to be felt. Nickel prices will probably remain volatile in the short term given broader issues but, once the dust settles, falling nickel pig iron production and the end to the relentless London Metal Exchange stock build should lay the foundation for a sustainable improvement in prices this year and the next.
Like nickel, the zinc market is waiting for the fundamentals to tighten. The expectation of tightness was priced in by last year's rally but closure of the giant Century mine in Australia is the key event in the bull story now and that closure will not happen until later this year. It remains to be seen how much effect it, and the closure of other mines, will really have on the concentrate market and, ultimately, the refined market. Our view has been that the supply gap the zinc bulls are looking for won't be a big deal.

All eyes in the tin market will be on China, Indonesia and Myanmar this year, to see how crucial supply-side issues pan out. There is the potential for production to accelerate further in China, fuelled by the continued emergence of Myanmar as a major source of concentrate, while there is the potential for Indonesian supply to be further constrained by the government's trade policy tinkering. Overall, we are neutral on tin's fundamental outlook in the short to medium term.

SHFE copper price highest in 2 weeks despite increased inventory
Base metals ended Friday trading on the Shanghai Futures Exchange (SHFE) mostly higher, with copper hitting its best price in two weeks.Demand for copper in China this week is said to be robust despite the forthcoming Chinese New year, a Singapore-based trader said.
The active SHFE April copper futures rose 670 yuan to end at 41,670 yuan, its highest in two weeks. The April contract has gained more than six percent since January 26.
Generally, credit is still tight, so you get more traders buying on spot. Most are rushing to get the papers done before the holidays although the goods will only be shipped out after the Chinese New Year,” the trader added.In wider Asian markets, the performance was mixed. The Shanghai Composite and Hang Seng were both lower since the open this morninig after a senior official from the People's Bank of China (PBoC) said the latest reserve-ratio cut by the central bank "is not the start of strong stimulus".
The Shanghai Composite is currently down 1.9 percent and the Hang Seng is lower by 0.38 percent whereas the Nikkei 225 is higher by 0.82 percent.For the day ahead, US non-farm payrolls will probably dominate market focus. Markets are looking for a slightly slower 236,000 increase in January’s print from December’s 252,000 reading. The unemployment rate is expected to stay at 5.6 percent. Investors are eyeing the performance of the labour market for a cue on the timeline for the Fed to increase interest rates. The dollar is weaker with the dollar index at 93.58.Data out yesterday showed a larger-than-expected US trade deficit which weakened the dollar as dollar-denominated goods are considered less price-competitive.“To some extent as a weaker dollar would likely boost LME copper and that could in turn give SHFE some lift',” said Fastmarkets head of research, William Adams.In the metals, spot copper in Changjiang is up 0.8 percent at Rmb 41,550-41,800, which means the backwardation with the futures has narrowed again, last at an equivalent of $33 per tonne. The LME/Shanghai copper arb ratio is last at 1 to 7.25 meaning the arb window remains closed.Open interest fell around 23,000 positions to 367,218. Still, it remains robust, with the two-week average at 300,000-400,000 compared with previous averages of around 200,000-300,000.
Weekly copper stocks in warehouses monitored by the SHFE increased 2,354 tonnes this week at 139,396 tonnes. with most of the inflow coming from warehouses in Shanghai.

US STOCK LOWER AT CLOSE OF STOCK
At the close in New York, the Dow Jones Industrial Average fell 0.34%, while the S&P 500 index lost 0.34%, and the NASDAQ Composite index declined 0.43%.The best performers of the session on the Dow Jones Industrial Average were Verizon Communications Inc (NYSE:VZ), which rose 3.07% or 1.47 points to trade at 49.33 at the close. Meanwhile, JPMorgan Chase & Co (NYSE:JPM) added 1.97% or 1.12 points to end at 57.89 and Goldman Sachs Group Inc (NYSE:GS) was up 1.47% or 2.66 points to 183.43 in late trade.The worst performers of the session were Intel Corporation (NASDAQ:INTC), which fell 1.92% or 0.65 points to trade at 33.29 at the close. Nike Inc (NYSE:NKE) declined 1.66% or 1.55 points to end at 91.79 and Visa Inc (NYSE:V) was down 1.61% or 4.38 points to 267.42.
The top performers on the S&P 500 were Harris Corporation (NYSE:HRS) which rose 9.63% to 76.18, FLIR Systems Inc (NASDAQ:FLIR) which was up 6.82% to settle at 33.97 and VeriSign Inc (NASDAQ:VRSN) which gained 5.30% to close at 59.97.The worst performers were Expedia Inc (NASDAQ:EXPE) which was down 11.51% to 77.87 in late trade, Scana Corporation (NYSE:SCG) which lost 5.31% to settle at 60.47 and Public Service Enterprise Group (NYSE:PEG) which was down 5.30% to 40.59 at the close.The top performers on the NASDAQ Composite were ROI Acquisition Corp (NASDAQ:EVRY) which rose 41.94% to 1.320, Recon Technology Ltd (NASDAQ:RCON) which was up 23.92% to settle at 2.590 and Stereotaxis Inc (NASDAQ:STXS) which gained 23.56% to close at 2.150.
The worst performers were Rentrak Corporation (NASDAQ:RENT) which was down 29.68% to 56.62 in late trade, TrovaGene Inc (NASDAQ:TROV) which lost 23.59% to settle at 4.470 and China HGS Real Estate Inc (NASDAQ:HGSH) which was down 21.45% to 3.150 at the close.
Falling stocks outnumbered advancing ones on the New York Stock Exchange by 1678 to 1116 and 1 ended unchanged; on the Nasdaq Stock Exchange, 1465 fell and 1303 advanced, while 5 ended unchanged.
The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 3.86% to 17.50.


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Last Updated February 11, 2015