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Daily comments as on Monday, 21 August 2023
Gold yesterday settled up by 0.15% at 58375 on slight weakness in the dollar and benchmark yields, but still ended the week with losses as recent sound U.S. economic data raised bets for interest rates staying higher for longer. Benchmark 10-year U.S. Treasury yields headed lower from 10-month highs. Premiums on physical gold in China jumped to the highest since December 2016 as economic worries spurred fresh safe-haven demand, while lower domestic prices brought back some buyers in India. In top consumer China, gold was sold at premiums of between $33 and $43 an ounce over global prices, up from $20-$35 last week. In India, a pickup in demand spurred by a drop in local prices, which fell to their lowest since July 6 at 58,275 rupees per 10 grams, allowed dealers to charge premiums for the first time in over two months. Dealers charged a premium of up to $3 an ounce over official domestic prices, inclusive of 15% import and 3% sales levies, up from last week's $1.5 discounts. Jewellers from southern India, especially from Kerala, were active ahead of Onam, the biggest festival in Kerala. Technically market is under short covering as the market has witnessed a drop in open interest by -2.61% to settle at 13371 while prices are up 85 rupees, now Gold is getting support at 58280 and below same could see a test of 58190 levels, and resistance is now likely to be seen at 58520, a move above could see prices testing 58670.
Trading Ideas:
* Gold trading range for the day is 58190-58670.
* Gold gains on slight weakness in the dollar and benchmark yields
* Gold ended the week with losses as recent sound U.S. economic data raised bets for interest rates staying higher for longer.
* Benchmark 10-year Treasury yields slip from 10-month high



Silver yesterday settled up by 0.31% at 70235 as China concerns persisted and the dollar and bond yields eased from recent highs, helping increase bullion's appeal. The 10-year U.S. Treasury yield fell back below 4.3 percent, after settling at the highest since November 2007. New jobless claims data pointed to a still tight labor market and a gauge of regional manufacturing activity rebounded in August to show its first positive reading in nearly a year, keeping alive fears of interest rates remaining higher for longer. Risk-off sentiment prevails in financial markets amid concerns about spreading debt defaults in China's property market and shadow banking industry. China's property developer Evergrande filed for bankruptcy protection in a U.S. court, raising concerns about ripple effects. Industrial production in the United States rose 1 percent from a month earlier in July 2023, the most in six months and following and above market expectations of a 0.3 percent increase. Manufacturing output rose 0.5 percent, beating expectations of a flat reading, as the production of motor vehicles and parts jumped 5.2 percent, while factory output elsewhere edged up 0.1 percent. Technically market is under short covering as the market has witnessed a drop in open interest by -6.19% to settle at 14050 while prices are up 217 rupees, now Silver is getting support at 69965 and below same could see a test of 69700 levels, and resistance is now likely to be seen at 70500, a move above could see prices testing 70770.
Trading Ideas:
* Silver trading range for the day is 69700-70770.
* Silver prices rose as dollar and bond yields ease
* 10-year U.S. Treasury yield fell back below 4.3 percent, after settling at the highest since November 2007.
* New jobless claims data pointed to a still tight labor market



Crudeoil yesterday settled up by 1.08% at 6726 amid signs of tightening global supplies but upside capped amid China’s weakening economy and fears of further US interest rate hikes. Weaker-than-expected economic data and a deepening property sector crisis in China added to concerns about the country’s faltering economy, with a surprise rate cut from the central bank failing to appease the market. Meanwhile, investors remain cautious amid signs of tightness in the market after OPEC+ majors Saudi Arabia and Russia curtailed supply. Net input of crude oil by U.S. refiners rose last week to its highest since January 2020, before the COVID-19 pandemic slashed demand, data from the Energy Information Administration showed. Refinery crude runs rose by 167,000 barrels per day to 16.7 million bpd in the week to Aug. 11, EIA said. U.S. oil output from top shale-producing regions is set to fall in September to its lowest level since May 2023, U.S. Energy Information Administration data showed. U.S. oil output is expected to fall to 9.41 million barrels per day (bpd) in September, EIA data showed. It had touched 9.45 million bpd in July, its highest on record. Technically market is under fresh buying as the market has witnessed a gain in open interest by 43.36% to settle at 3733 while prices are up 72 rupees, now Crudeoil is getting support at 6627 and below same could see a test of 6529 levels, and resistance is now likely to be seen at 6780, a move above could see prices testing 6835.
Trading Ideas:
* Crudeoil trading range for the day is 6529-6835.
* Crude oil gains amid signs of tightening global supplies
* However, upside capped amid China’s weakening economy and fears of further US interest rate hikes
* US refinery crude input rises to highest since Jan 2020 – EIA



Naturalgas yesterday settled down by -3.06% at 212.2 on expectations of weak demand heading into a seasonally slow season and as relief from heat waves raised the prospect of less consumption for cooling. Gas prices are drifting back down on some expected temperature moderation as production maintains at a lofty level. Meteorologists forecast the weather in the Lower 48 states will remain hotter than normal through at least Sept. 2, but, deviations from normal are declining. The U.S. Energy Information Administration (EIA) said utilities added 35 billion cubic feet (bcf) of gas into storage during the week ended Aug. 11, filling stockpiles to 3,065 bcf. That was 10.8% above the five-year (2018-2022) average. Refinitiv said average gas output in the Lower 48 states was 101.7 bcfd so far in August, nearly the same as the 101.8 bcfd in July, and not far from a monthly record of 102.2 bcfd in May. Data provider Refinitiv forecast U.S. gas demand, including exports, would mostly remain unchanged from 103.6 billion cubic feet per day (bcfd) this week to 103.8 bcfd next week. Technically market is under fresh selling as the market has witnessed a gain in open interest by 22.91% to settle at 38981 while prices are down -6.7 rupees, now Naturalgas is getting support at 208.7 and below same could see a test of 205.1 levels, and resistance is now likely to be seen at 217.7, a move above could see prices testing 223.1.
Trading Ideas:
* Naturalgas trading range for the day is 205.1-223.1.
* Natural gas fell amid weak demand heading into a seasonally slow season.
* Gas prices are drifting back down on some expected temperature moderation as production maintains at a lofty level.
* EIA said utilities added 35 bcf of gas into storage during the week ended Aug. 11, filling stockpiles to 3,065 bcf.




Copper yesterday settled up by 0.28% at 725.65 as the dollar retreated from a two-month high, but seen pressure in a week as traders gauged disappointing China economic data and fears of further U.S. rate hikes. China's central bank injected more money into the market to support the economy. Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 25.9 % from last Friday. Net long positions of copper on the London Metals Exchange (LME) are at a six-month high, partly fuelled by low Chinese copper inventories data. Combined inventory in the Shanghai Futures Exchange and Chinese bonded warehouses were 110,314 metric tonnes on Aug. 11, down 53% year-on-year and equivalent to just under three days of consumption. The total net long position in LME copper rose to 9,488 contracts on Aug. 11, the highest since Feb. 10, data provided in the Commitments of Traders Report showed. Chinese copper stocks readily available in the spot market, which includes stocks in warehouses of the Shanghai Futures Exchange, totalled 82,600 tonnes on Aug. 14, up 17.5% year-on-year. However, Chinese bonded warehouse inventory, at 57,399 tonnes on Aug. 11, was down 70% from the same time last year, data showed. Technically market is under short covering as the market has witnessed a drop in open interest by -9.29% to settle at 4444 while prices are up 2.05 rupees, now Copper is getting support at 722.8 and below same could see a test of 719.9 levels, and resistance is now likely to be seen at 727.3, a move above could see prices testing 728.9.
Trading Ideas:
* Copper trading range for the day is 719.9-728.9.
* Copper gains as the dollar retreated from a two-month high
* China's central bank injected more money into the market to support the economy.
* Shanghai warehouse copper stocks down 25.9%



Zinc yesterday settled down by -0.31% at 209.5 as zinc inventories in LME-registered warehouses have surged to a 17-month high, highlighting a market surplus amid weak demand. Backwardation in LME zinc strengthened, with the cash contract at a $12.50-a-ton discount to the three-month contract, the biggest discount since July 21, as inventories in LME-registered warehouses surged. The jump in zinc inventories took place ahead of the expiry of LME monthly futures contracts, when investors can deliver physical metal into LME warehouses to satisfy their futures positions. Looking forward, S&P Global anticipates a moderate growth of 1.4% in the worldwide demand for refined zinc in 2023, influenced by ongoing inflation and stringent monetary policies in both the US and Europe. Meanwhile, weak manufacturing data and a struggling property sector suggested more stimulus is needed to enhance the world's largest economy. China is targeting 5% annual growth this year. After July economic activity data failed to match expectations, an increasing number of economists are warning that it could miss the goal unless Beijing ramps up support measures. China's central bank injected more liquidity into the market, making more money available to support financial assets. Technically market is under long liquidation as the market has witnessed a drop in open interest by -9.67% to settle at 3231 while prices are down -0.65 rupees, now Zinc is getting support at 208.2 and below same could see a test of 206.7 levels, and resistance is now likely to be seen at 210.9, a move above could see prices testing 212.1.
Trading Ideas:
# Zinc trading range for the day is 206.7-212.1.
# Zinc dropped as LME inventories have surged to a 17-month high
# Backwardation in LME zinc strengthened, with the cash contract at a $12.50-a-ton discount to the three-month contract, the biggest discount since July 21
# China is targeting 5% annual growth this year.




Aluminium yesterday settled up by 0.18% at 197.25 following support measures from China. China's commerce ministry demanded that the United States immediately lift the tariffs imposed on Chinese steel and aluminium imports. The discount on aluminium for near-term delivery compared with the three-month contract on the London Metal Exchange (LME) has reached its highest since the global financial crisis of 2008, indicating weak demand and rising supply. The discount, or contango, for cash aluminium against the three-month contract climbed to $55.50 a metric tonne at Monday's market close for its highest level since November 2008. That compared to a premium, or backwardation, of $40.50 at the end of May. The contango has persisted since early June, when China's Yunnan province started ramping up energy-intensive aluminium production after the end of power curbs. Global primary aluminium output rose by 1.8% year on year in the first half of 2023, mainly owing to higher production in China, according to the International Aluminium Institute. In July China's output rose to near-record levels. Sentiment surrounding the construction sector has deteriorated further with the suspension of bond trading by Country Garden. Technically market is under short covering as the market has witnessed a drop in open interest by -6.38% to settle at 2935 while prices are up 0.35 rupees, now Aluminium is getting support at 196.5 and below same could see a test of 195.7 levels, and resistance is now likely to be seen at 198.1, a move above could see prices testing 198.9.
Trading Ideas:
* Aluminium trading range for the day is 195.7-198.9.
* Aluminium gains following support measures from China
* Morgan Stanley lowers China's GDP forecast for 2023 to 4.7% from 5%.
* Morgan Stanley lowers China's GDP prediction for 2024 to 4.2% from 4.5%.



Cottoncandy yesterday settled up by 0.1% at 59980 as Global cotton production will likely decline next season (October 2023-September 2024) by three per cent, while consumption may remain stagnant and ending stocks could be lower. However upside seen limited amid concerns over a slowdown in top buyer China. Cotton Association of India (CAI) maintained the cotton crop production forecast for the 2022-23 season at 311.18 lakh bales. The total cotton supply for October 2022 to July 2023 is estimated at 332.30 lakh bales, which consists of arrivals of 296.80 lakh bales, imports of 11.50 lakh bales and the opening stock estimated by the CAI at 24 lakh bales at the beginning of the season. Arrivals in Punjab have been recorded at almost one-third of the previous year, 2021-22. In Punjab the arrival of cotton in the 2022-23 marketing season has been recorded at 8.7 lakh quintal till date this year, while it was 28.89 lakh quintal for the entire 2021-22 season. USDA weekly export sales report showed net sales of 277,700 running bales of cotton for 2023/2024, with increases primarily for China. During this Kharif season, cotton cultivation in Gujarat has achieved a remarkable milestone, surpassing the records of the past eight years. In Rajkot, a major spot market, the price ended at 29183.35 Rupees gained by 0.08 percent. Technically market is under short covering as the market has witnessed a drop in open interest by -2.1% to settle at 327 while prices are up 60 rupees, now Cottoncandy is getting support at 59800 and below same could see a test of 59630 levels, and resistance is now likely to be seen at 60240, a move above could see prices testing 60510.
Trading Ideas:
* Cottoncandy trading range for the day is 59630-60510.
* Cotton gains as Global cotton production will likely decline next season by three per cent
* CAI maintained the crop forecast for 2022-23 at 311.18 lakh bales.
* Crop in North India is under the threat of pink bollworm attacks
* In Rajkot, a major spot market, the price ended at 29183.35 Rupees gained by 0.08 percent.



Turmeric yesterday settled up by 4.51% at 16370 amid limited availability of quality produce in the market. Ongoing sowing and crop progress is major price driver for turmeric and forecast of drier weather in southern and central region has added worries to turmeric crops. Sowing activities almost completed in Maharashtra and likely to pick up in Andhra Pradesh and Tamil Nadu but erratic monsoon rainfall has impacted the sowing progress. The looming threat of El Nino casts a shadow over the upcoming turmeric crop. Meteorological predictions suggest the activation of El Nino in July, potentially resulting in reduced rainfall and drought conditions. Such conditions could particularly impact yields, like turmeric, that heavily rely on monsoon irrigation. Farmers shift in focus has led to expectations of a 20-25 percent decrease in turmeric sowing this year, notably in states like Maharashtra, Tamil Nadu, Andhra Pradesh, and Telangana. Turmeric exports during Apr-Jun 2023, rose by 16.87 percent at 57,775.30 tonnes as compared to 49,435.38 tonnes exported during Apr- Jun 2022. In Nizamabad, a major spot market, the price ended at 14134.5 Rupees dropped by -0.09 percent. Technically market is under short covering as the market has witnessed a drop in open interest by -0.41% to settle at 15620 while prices are up 706 rupees, now Turmeric is getting support at 15658 and below same could see a test of 14944 levels, and resistance is now likely to be seen at 16828, a move above could see prices testing 17284.
Trading Ideas:
* Turmeric trading range for the day is 14944-17284.
* Turmeric prices gained amid limited availability of quality produce in the market.
* Sowing activities almost completed in Maharashtra and likely to pick up in Andhra Pradesh and Tamil Nadu
* In Jun 2023 around 18,356.57 tonnes was exported as against 19827.86 tonnes in May 2023 showing a drop of 7.42%.
* In Nizamabad, a major spot market, the price ended at 14134.5 Rupees dropped by -0.09 percent.



Jeera yesterday settled up by 1.08% at 59690 as supply is limited due to the rainy environment. However, upside seen limited in wake of improved global supply condition. Cheaper availability of Syria and jeera in global market will lead to fall in export demand from India in coming days. Drier weather condition in Gujarat will also lead to rise in arrivals that will cap the upwards move. China’s cumin imports and exports have caused temporary corrections in cumin prices, with a recent $200 decrease in the international market. The possibility of China purchasing Indian cumin in October-November before the arrival of new cumin adds further uncertainty to the market dynamics. According to FISS forecasts, cumin demand is predicted to exceed 85 lakh bags this year, with a likely supply of 65 lakh bags. Jeera exports during Apr-Jun 2023, rose by 13.16 percent at 53,399.65 tonnes as compared to 47,190.98 tonnes exported during Apr- Jun 2022. In Jun 2023 around 10,411.14 tonnes of jeera was exported as against 25,903.63 tonnes in May 2023 showing a drop of 59.81%. In Jun 2023 around 10,411.14 tonnes of jeera was exported as against 21,587.63 tonnes in Jun 2022 showing a drop of 51.78%. In Unjha, a major spot market, the price ended at 60801.75 Rupees gained by 0.27 percent. Technically market is under short covering as the market has witnessed a remain unchanged in open interest by 0% to settle at 6600 while prices are up 635 rupees, now Jeera is getting support at 59290 and below same could see a test of 58870 levels, and resistance is now likely to be seen at 60030, a move above could see prices testing 60350.
Trading Ideas:
* Jeera trading range for the day is 58870-60350.
* Jeera gained as supply is limited due to the rainy environment.
* However, upside seen limited in wake of improved global supply condition.
* Cheaper availability of Syria and jeera in global market will lead to fall in export demand from India in coming days.
* In Unjha, a major spot market, the price ended at 60801.75 Rupees gained by 0.27 percent.

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