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Gold

Daily comments as on Tuesday, July 12, 2022
Gold yesterday settled down by -0.27% at 50644 after strong U.S. job market data boosted the dollar and the likelihood of another big rate hike by the Federal Reserve. The jobs report tempered some of the recessionary fears that were starting to cast doubts over how far the Fed could go in terms of tightening. A strong labour market is often considered a healthy economic indicator and gives the central bank more ammunition for another big hike, in turn pushing gold lower. Atlanta Fed President Raphael Bostic said he "fully" supports another three quarters of a percentage point rate hike at the Fed's next policy meeting later this month. However, growing pessimism over the state of some economies in Asia, and geopolitical instability to some extent, mitigate gold's losses, as bullion remains the go-to safe haven during times of trouble. Physical gold demand improved slightly in India and discounts narrowed after prices eased, while concerns over fresh coronavirus outbreaks kept a leash on activity in China. Dealers were offering a discount of up to $28 an ounce over official domestic prices down from last week's discount of $40. Some buyers are postponing purchases as they were confused by volatile global prices and fluctuations in the Indian rupee, which hit a record low. Technically market is under long liquidation as market has witnessed drop in open interest by -3.14% to settled at 8866 while prices down -135 rupees, now Gold is getting support at 50551 and below same could see a test of 50457 levels, and resistance is now likely to be seen at 50804, a move above could see prices testing 50963.

Trading Ideas:
* Gold trading range for the day is 50457-50963.
* Gold prices fell after strong U.S. job market data boosted the dollar
* Geopolitical risks may limit downside losses in gold
* U.S. dollar heads back towards 20-year perch

Silver
Silver yesterday settled down by -0.36% at 56925 as the dollar rose to hover near a 20-year peak amid bets for steep interest-rate hikes. The dollar is also seeing safe-haven demand on recession worries as Russia turns off Nord Stream 1, the biggest single pipeline carrying Russian gas to Germany for annual maintenance. Atlanta Fed President Raphael Bostic said he "fully" supports another three quarters of a percentage point rate hike at the Fed's next policy meeting later this month. Stronger-than-expected U.S. jobs data added to expectations of another 75-bps rate hike at the upcoming Fed meeting later this month. Euro zone finance ministers said the fight against inflation was the current priority despite dwindling growth in the bloc, as they are set to be informed of a deteriorating economic outlook by the European Commission. At a regular monthly meeting of ministers, the EU executive commission will give an update of its economic forecasts, showing slower growth and higher inflation, the commission's vice-president Valdis Dombrovskis said on the sidelines of the meeting. "One can expect some downwards revisions, even more so for next year," Dombrovskis said, adding that growth remained resilient. Technically market is under fresh selling as market has witnessed gain in open interest by 1.96% to settled at 21240 while prices down -206 rupees, now Silver is getting support at 56773 and below same could see a test of 56621 levels, and resistance is now likely to be seen at 57183, a move above could see prices testing 57441.

Trading Ideas:
* Silver trading range for the day is 56621-57441.
* Silver dropped as the dollar rose to hover near a 20-year peak amid bets for steep interest-rate hikes.
* Fed Bostic said he "fully" supports another three quarters of a percentage point rate hike at the Fed's next policy meeting later this month.
* Stronger-than-expected U.S. jobs data added to expectations of another 75-bps rate hike

Crude oil
Crude oil yesterday settled down by -0.72% at 8254 as markets braced for an expected drop in demand because of mass testing for COVID-19 in China, which outweighed ongoing concern over tight supply. The market was rattled by news that China had discovered its first case of a highly transmissible Omicron subvariant in Shanghai and that new cases had jumped to 63 in the country's largest city from 52 a day earlier. The market remains jittery about plans by Western nations to cap Russian oil prices, with Russian President Vladimir Putin warning that further sanctions could lead to "catastrophic" consequences in the global energy market. Supply has continued so far on the pipeline, which carries about 1% of global oil, with a Russian court overturning an earlier ruling suspending operations there. U.S. crude oil production slid in April by about 0.5% to its lowest since February, according to a monthly report from the U.S. Energy Information Administration. Oil production fell to about 11.6 million barrels per day in April from nearly 11.7 million bpd the month prior, the report showed. Output, which has been recovering from the impact of the coronavirus pandemic, is still far below its record high of 12.3 million bpd in 2019. Technically market is under long liquidation as market has witnessed drop in open interest by -7.85% to settled at 4814 while prices down -60 rupees, now Crude oil is getting support at 8082 and below same could see a test of 7909 levels, and resistance is now likely to be seen at 8366, a move above could see prices testing 8477.
Trading Ideas:
* Crude oil trading range for the day is 7909-8477.
* Crude oil prices fell as markets braced for an expected drop in demand because of mass testing for COVID-19 in China
* New Omicron subvariant case in Shanghai rattles market
* U.S. oil output slips 0.5% in April to lowest since February – EIA

Natural gas 
Nat.Gas yesterday settled up by 6.13% at 512.7 as the biggest single pipeline carrying Russian gas to Germany is set to stop flows for ten days for a scheduled maintenance, but markets are worried the shutdown might be extended due to the war in Ukraine. The Nord Stream 1 pipeline which transports 55 billion cubic meters a year of gas from Russia to Germany will undergo maintenance from July 11 to 21. Kremlin spokesperson Dmitry Peskov dismissed claims the move could be politically motivated and insisted that the maintenance shutdown was a regular, scheduled event. Last month, Russia already cut flows to 40% of the pipeline’s total capacity, citing delayed return of equipment being serviced and mired by sanctions in Canada. Meanwhile, signs of strong US demand for natural gas also buoyed prices, with Refinitiv expecting average US demand including exports to rise to 99.0 bcfd this week from 96.2 bcfd last week due to hot weather. Recent price increases prompted gas speculators last week to cut their net short futures and options positions on the NYMEX and Intercontinental Exchanges, according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 96.2 bcfd so far in July from 95.3 bcfd in June. Technically market is under fresh buying as market has witnessed gain in open interest by 16.09% to settled at 3687 while prices up 29.6 rupees, now Natural gas is getting support at 494.9 and below same could see a test of 477 levels, and resistance is now likely to be seen at 531.6, a move above could see prices testing 550.4.

Trading Ideas:
* Natural gas trading range for the day is 477-550.4.
* Natural Gas jumps on looming Nord stream shutdown
* Markets are worried the shutdown might be extended due to the war in Ukraine.
* Average gas output in the U.S. Lower 48 states rose to 96.2 bcfd so far in July from 95.3 bcfd in June.

Copper

Copper yesterday settled down by -1.8% at 648.9 as persistent concerns about recession dampened metals demand. China's copper cathode output in June was little changed from May, as some smelters shut down for maintenance even as others lifted output. Production at was at 777,000 tonnes, up by 0.3% from a revised 774,600 tonnes in May. Smelters in the northwestern region Xinjiang, as well as eastern Zhejiang and Anhui provinces, began planned maintenance last month, while some extended the periods they went offline amid poor margins in the world's top copper smelting nation. Some smelters had however increased production, expecting profits to improve as COVID-19 curbs were lifted. In the first half of 2022, the surveyed smelters made 4.62 million tonnes of copper cathode, up 2.11% on an annual basis. China's top copper smelters set their floor treatment and refining charges (TC/RCs) for copper concentrate in the third quarter of 2022 at $80 per tonne and 8 cents per pound. Copper output at Peru's huge Las Bambas mine has returned to normal levels after a two-month shutdown due to protests was ended last month, sources and power usage data show, but talks over a deal with community leaders have stalled, threatening more tensions. Technically market is under fresh selling as market has witnessed gain in open interest by 9.49% to settled at 5875 while prices down -11.9 rupees, now Copper is getting support at 641.4 and below same could see a test of 633.9 levels, and resistance is now likely to be seen at 658, a move above could see prices testing 667.1.
Trading Ideas:
* Copper trading range for the day is 633.9-667.1.
* Copper plunged as persistent concerns about recession dampened metals demand.
* China's June copper output flat on prior month
* Peru's Las Bambas copper mine revives after protest; but deal talks stall

Zinc

Zinc yesterday settled down by -1% at 276.1 weighed down by mounting fears of a global economic slowdown and rising Covid cases in top consumer China. Increasing prospects of a global recession continued to dominate market sentiment as major central banks are racing ahead with aggressive rate hikes to combat surging inflation. In the US, a stronger-than-expected US jobs report and expectations for another hot US inflation reading could pave the way for the Federal Reserve to deliver another 75 basis point rate increase this month. Rising virus cases throughout China and the discovery of a new Omicron sub variant in Shanghai also raised fears about the potential for wider lockdowns in the country, further pressuring prices. China's refined zinc output stood at 490,300 mt in June, down 24,900 mt or 4.84% MoM and 17,700 mt or 3.48% YoY. From January to June 2022, the combined refined zinc output was 2.973 million mt, a decrease of 1.49% year on year. survey showed that the output of domestic refined zinc decreased in June and was less than expected. The output increment was mainly brought about by a smelter in Inner Mongolia which resumed the production after maintenance. Technically market is under fresh selling as market has witnessed gain in open interest by 7.37% to settled at 1558 while prices down -2.8 rupees, now Zinc is getting support at 272.5 and below same could see a test of 268.8 levels, and resistance is now likely to be seen at 280.2, a move above could see prices testing 284.2.

Trading Ideas:
* Zinc trading range for the day is 268.8-284.2.
* Zinc dropped amid mounting fears of a global economic slowdown.
* Rising virus cases throughout China and the discovery of a new Omicron sub variant in Shanghai also raised fears about lockdowns in country.
* China's refined zinc output stood at 490,300 mt in June, down 24,900 mt or 4.84% MoM and 17,700 mt or 3.48% YoY.

Aluminium
Aluminium yesterday settled down by -2.11% at 206.95 as the social inventory dropped slowly, and the resurging pandemic in Wuxi has affected the market. The market weighed the US economic readings, including the better-than-expected labour market; while the surging US dollar index continued to pressure the metals market. China's annual inflation rate climbed to 2.5% in June from 2.1% in the prior month and above market forecasts of 2.4%. This was the highest point since July 2020, as food prices rose the most in 21 months with pork prices declining much softer; while non-food inflation accelerated further. China has set a target of CPI at around 3% for this year, the same as in 2021. China's producer price inflation eased to a 15-month low of 6.1 percent yoy in June 2022 from 6.4 percent in the prior month and compared with market consensus of 6.0 percent. The latest figure represented the 18th straight month of slowing producer prices, amid measures to contain COVID-19 infections and fears about global recession that triggered a sell-off in ferrous metals. Food prices in China went up by 2.9 percent year-on-year in June 2022, accelerating from a 2.3 percent rise a month earlier and pointing to the third straight month of increase. Technically market is under fresh selling as market has witnessed gain in open interest by 17.86% to settled at 3062 while prices down -4.45 rupees, now Aluminium is getting support at 205.3 and below same could see a test of 203.6 levels, and resistance is now likely to be seen at 210, a move above could see prices testing 213.

Trading Ideas:
* Aluminium trading range for the day is 203.6-213.
* Aluminium dropped as the resurging pandemic in Wuxi has affected the market.
* China inflation rate hits 23-month high
* China producer inflation slows to 15-month low

Mentha oil
Mentha oil yesterday settled down by -1.11% at 1001.6 as Synthetic Mentha supply remains uninterrupted. Many states have seen gutkha and pan masala ban which have seen a lower demand from the pan masala industry. However, downside seen limited amid low production this season and improving demand post-pandemic. The harvest is expected to be almost the same as last year's in Barabanki area but harvesting this year is expected to be delayed. Crop growth is poor this year compared with last year despite use of fertiliser. The plant is about 25% less than the total crop, water is being felt after every three days. The production of Mentha oil was historically high in 2020-21, the area remained almost similar last year but the yields were lower which affected the production. In the current year we forecast production to fall to around 46,238 MT due to sharp fall in area and loss in yields following severe summer heat. which will come closed 14% down in the year 20-21. Germany's BASF said it would have to stop production if natural gas supplies fell to less than half its needs, as the world's largest chemicals group warned of the damage to its operations from Europe's power crunch. In Sambhal spot market, Mentha oil dropped by -8.3 Rupees to end at 1126.9 Rupees per 360 kgs.Technically market is under long liquidation as market has witnessed drop in open interest by -3.59% to settled at 1129 while prices down -11.2 rupees, now Mentha oil is getting support at 995.9 and below same could see a test of 990.1 levels, and resistance is now likely to be seen at 1009.3, a move above could see prices testing 1016.9.

Trading Ideas:
* Mentha oil trading range for the day is 990.1-1016.9.
* In Sambhal spot market, Mentha oil dropped  by -8.3 Rupees to end at 1126.9 Rupees per 360 kgs.
* Mentha oil dropped as Synthetic Mentha supply remains uninterrupted.
* Many states have seen gutkha and pan masala ban which have seen a lower demand from the pan masala industry.
* However, downside seen limited amid low production this season and improving demand post-pandemic.

Turmeric
Turmeric yesterday settled up by 0.38% at 7872 as arrivals of New season turmeric are diminishing and exports demand is improving as season progresses. However upside seen limited amid reports of sufficient stocks and good sowing progress in south India is pressurizing the prices. Turmeric exports during 2021-22 (Apr-Mar) has improved by 4 percent at 1.78 lakh tonnes as compared to 1.72 lakh tonnes exported during 2020-21. In the month of March 2022 around 15,751.54 tonnes turmeric was exported as against 12,361.20 in March 2021 showing an increase of 22%. In the month of April 2022 around 13,762.59 tonnes of turmeric was exported as against 13,282.53 in April 2021 showing an increase of 4%. In the month of April 2022 around 13,762.59 tonnes turmeric was exported as against 15,751.54 in March 2022 showing a decline of 13%. Turmeric harvesting in Indonesia is likely to start during June – July 2022. Crop is reported to be normal. Domestic demand reduced particularly with the new season crop supplies from Marathwada region of Maharashtra during April. Turmeric all India production for 2022 is estimated at 4.67 lakh tonnes, revised after crop damage due to excessive rainfall in Maharashtra, Andhra Pradesh and Telangana during October and November. In Nizamabad, a major spot market in AP, the price ended at 7978.8 Rupees dropped -141.7 Rupees.Technically market is under fresh buying as market has witnessed gain in open interest by 34.51% to settled at 11595 while prices up 30 rupees, now Turmeric is getting support at 7824 and below same could see a test of 7774 levels, and resistance is now likely to be seen at 7940, a move above could see prices testing 8006.

Trading Ideas:
* Turmeric trading range for the day is 7774-8006.
* Turmeric gained as arrivals of New season turmeric are diminishing and exports demand is improving as season progresses.
* However, upside seen limited amid reports of sufficient stocks and good sowing progress in south India.
* In the month of April 2022 around 13,762.59 tonnes turmeric was exported as against 15,751.54 in March 2022 showing a decline of 13%.
* In Nizamabad, a major spot market in AP, the price ended at 7978.8 Rupees dropped -141.7 Rupees.

Jeera 

Jeera yesterday settled up by 0.25% at 21990 as in Gujarat and Rajasthan markets arrivals have remained low. Big traders and stockiest have been holding to stocks anticipating further increase in prices. Cumin seed exports during the current season are likely to remain low as the current crop is very less this time. Cumin seed exports during 2021-22 (Apr-Mar) has declined by 32 percent at 2.17 lakh tonnes as compared to 2.86 lakh tonnes exported during 2020-21. In the month of April 2022 around 10,707.38 tonnes cumin seed exported as against 14,595.43 in March 2022 showing a decline of 27%. In view of the international situation of cumin seeds, all the countries of the whole world are not in a position to get cumin from a single country except India. Syria's crop is reported to have come absolutely negligible in the event of drought. Turkey has exited the international cumin market for the last 2 years. In Afghanistan, cumin has grown by 40 to 50% of the current year. Iran's cumin crop has been cut short and the crop there has been over within a few days of arrival. China's demand for cumin is currently sporadic, with China buying 300 containers of Indian cumin in the month of June, the demand is very low at the moment. In Unjha, a key spot market in Gujarat, jeera edged down by -27.7 Rupees to end at 21931.7 Rupees per 100 kg.Technically market is under fresh buying as market has witnessed gain in open interest by 10.79% to settled at 10503 while prices up 55 rupees, now Jeera is getting support at 21840 and below same could see a test of 21690 levels, and resistance is now likely to be seen at 22125, a move above could see prices testing 22260.

Trading Ideas:
* Jeera trading range for the day is 21690-22260.
* Jeera prices gained as in Gujarat and Rajasthan markets arrivals have remained low.
* Syria's crop is reported to have come absolutely negligible in the event of drought.
* Iran's cumin crop has been cut short and the crop there has been over within a few days of arrival.
* In Unjha, a key spot market in Gujarat, jeera edged down by -27.7 Rupees to end at 21931.7 Rupees per 100 kg.

Cotton

Cotton yesterday settled up by 2.25% at 43570 as support seen after reports China will start purchasing cotton for its state reserves from July 13. The state stockpiler will buy between 300,000 and 500,000 tonnes in total, the website said, as part of annual rotation of its stocks. Cotton sowing dropped by nearly -0.18% to 84.6 lakh hectares in 2022 against an area sown of 84.75 lakh hectares in 2021. Cotton sowing in Gujarat fall by nearly -6% with 1,556,683 hectares against sown area of 2021 which was 1,650,463 hectares. Cotton sowing in Rajasthan witnessed a gain of 8.11% with 598.14 thousand hectares as against 553.26 thousand hectares on the same day last year. India has extended deadline to import cotton without paying import taxes until Oct. 31 from the earlier cut-off date of Sept. 30, the government said in a notification, as the sowing of the fibre crop delayed in some regions due to patchy monsoon rainfall. The world's biggest producer of the fibre had allowed duty free imports in April after local prices jumped to a record high because of a drop in the production and following rally in global prices In spot market, Cotton dropped by -370 Rupees to end at 42370 Rupees.Technically market is under short covering as market has witnessed drop in open interest by -5.6% to settled at 1483 while prices up 960 rupees, now Cotton is getting support at 42490 and below same could see a test of 41400 levels, and resistance is now likely to be seen at 44490, a move above could see prices testing 45400.

Trading Ideas:
* Cotton trading range for the day is 41400-45400.
* Cotton prices rose as support seen after reports China to buy cotton for state reserves from July 13
* India's Cotton sowing dropped by nearly -0.18% to 84.6 lakh hectares in 2022 against an area sown of 84.75 lakh hectares in 2021
* Telangana Cotton sowing fall by nearly -6.12% to 31,86,635 hectares in 2022.
* In spot market, Cotton dropped  by -370 Rupees to end at 42370 Rupees.

- www.kediaadvisory.com

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