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Gold

Daily comment as on Tuesday, 18 June 2024
Gold prices decreased by 0.72%, settling at 71,450, under pressure from higher US Treasury yields as investors awaited further signals regarding the Federal Reserve's monetary policy outlook. Despite recent cooling US inflation data suggesting a potential rate cut, the Fed has indicated only one cut in its updated economic projections. U.S. economic data showed a softening in price pressures, with producer prices unexpectedly falling in May, adding to the indications that inflation is subsiding after a surge in the first quarter. Additional inflation data and jobless claims suggest a weakening labor market, bolstering hopes for a September rate cut from the Federal Reserve. On the global front, gold imports to China via Hong Kong fell by 38% in April compared to the previous month, highlighting a shift from high consumption levels recorded in the first quarter. In India, gold demand remained weak despite recent price corrections, with buyers delaying purchases due to the absence of major festivals and the nearing end of the wedding season. Indian dealers offered discounts of up to $10 an ounce over official domestic prices, while premiums in China decreased to $18-$26 per ounce due to weak consumer sentiment and high spot prices. Technically, the gold market is experiencing long liquidation, with a 2.1% drop in open interest to 14,746 contracts and prices falling by 515 rupees. Gold finds support at 71,255, with a potential test of 71,060 if this level fails. Resistance is anticipated at 71,715, and a move above this level could see prices reaching 71,980.

Trading Ideas:

* Gold trading range for the day is 71060-71980.
* Gold dropped pressured by higher US Treasury yields and investors awaited further cues from Fed’s monetary policy outlook.
* Data showed that U.S. producer prices unexpectedly fell in May, another indication that inflation was subsiding.
* Indian dealers offered a discount of up to $10 an ounce over official domestic prices, versus last week's discount of $14.

Silver

Yesterday, silver prices settled down by 0.3% at 88,820, as investors weighed softer-than-expected US inflation data against the Federal Reserve’s updated interest rate projections. The US Producer Price Index (PPI) unexpectedly fell in May due to lower energy costs, indicating a continued subsiding of inflationary pressures, following cooler-than-expected consumer inflation data. Despite these signs of easing inflation, the Federal Open Market Committee members' latest dot-plot projections showed they anticipate only one 25 basis point rate cut this year, with some members predicting no cuts at all. The CME Group’s FedWatch Tool currently shows a 67% probability of a rate cut in September. Global central banks have also exhibited dovish tendencies, with rate cuts from the European Central Bank and the Bank of Canada, and more expected from the Bank of England and the People's Bank of China, which helped limit silver's losses. The US's imposition of 50% tariffs on Chinese solar cell imports, affecting a key industry for silver, also added to market dynamics. Nevertheless, strong demand in China, notably from the world's largest solar farm in Xinjiang, prevented further declines in silver prices. India imported a record 4,172 metric tons of silver from January to April, a significant increase from 455 tons in the same period last year, with nearly half coming from the UAE to leverage lower import duties. Technically, the market is experiencing fresh selling, with open interest increasing by 0.02% to 20,643 contracts, while prices dropped by 270 rupees. Silver is finding support at 88,265, with a potential test of 87,710 on the downside. Resistance is expected at 89,375, and a move above this level could see prices testing 89,930.
 

Trading Ideas:

* Silver trading range for the day is 87710-89930.
* Silver gains as investors assessed softer-than-anticipated US inflation figures
* Data showed that the US PPI unexpectedly fell in May, indicating that inflationary pressures continued to subside.
* Latest dot-plot projections from FOMC members revealed that, on average, they anticipate only one 25 basis point rate cut this year

Crude oil

Crude oil prices increased by 1.46%, closing at 6,670, supported by optimistic projections for crude oil and fuel demand. The Organization of Petroleum Exporting Countries (OPEC) maintained its forecast for robust global oil demand growth in 2024, despite lower-than-expected usage in the first quarter. OPEC projects world oil demand to rise by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025, driven by travel and tourism in the second half of the year. The report indicated that steady global economic growth has persisted in the first half of 2024, with an anticipated increase of 2.3 million bpd in the second half. Goldman Sachs also forecasted solid U.S. fuel demand this summer, adding to the bullish sentiment. However, the International Energy Agency (IEA) expects oil demand to peak by 2029 and stabilize around 106 million bpd towards the end of the decade. U.S. crude oil stocks rose by 3.730 million barrels for the week ending June 7, 2024, the largest increase in six weeks, contrary to market expectations of a 1.55 million barrel decline, as reported by the EIA Petroleum Status Report. Gasoline stocks surged by 2.566 million barrels, exceeding expectations of a 1.25 million rise, and distillate stockpiles increased by 0.881 million barrels, above the consensus of 0.50 million. Conversely, crude stocks at the Cushing, Oklahoma delivery hub fell by 1.593 million barrels, following a previous week's build of 0.854 million barrels. Technically, the crude oil market is experiencing short covering, with a significant drop in open interest by 47.73% to 2,924 contracts, while prices increased by 96 rupees. Crude oil finds support at 6,582, with a potential test of 6,493 if this level fails. Resistance is expected at 6,719, and a move above this level could see prices testing 6,767.

Trading Ideas:

* Crudeoil trading range for the day is 6493-6767.
* Crude oil gains after solid projections for crude oil and fuel demand.
* OPEC stuck to a forecast for relatively strong growth in global oil demand for 2024
* Goldman Sachs projected solid U.S. fuel demand this summer.

Natural gas

Yesterday, natural gas prices declined by 3.35% to settle at 233.8, driven by expectations of increased supply with the impending service of the Mountain Valley gas pipeline and news of EQT, the largest gas producer in the U.S., boosting output due to recent price and demand increases. The U.S. EIA indicated in its Short Term Energy Outlook that natural gas production would decrease more than initially estimated for this year, while demand is projected to reach a record high. The EIA forecasts dry gas production to decline from a record 103.8 billion cubic feet per day in 2023 to 102.1 bcfd in 2024, as several producers reduce drilling activities following a period of three-year low gas prices earlier this year. In June, gas output in the Lower 48 states has averaged 97.8 bcfd, down from May's 98.1 bcfd and below the December 2023 record of 105.5 bcfd. U.S. utilities added 74 billion cubic feet (Bcf) of gas into storage during the week ending June 7, 2024, slightly below market expectations of a 75 Bcf increase. This addition marked the tenth consecutive week of seasonal storage increases, bringing total stockpiles to 2,974 Bcf, which is 364 Bcf higher than the same period last year and 573 Bcf above the five-year average of 2,401 Bcf. Technically, the market is experiencing long liquidation with a minor drop in open interest by 0.07% to 16,443 contracts, while prices decreased by 8.1 rupees. Natural gas is currently supported at 229.1, with a potential test of 224.3 on the downside. Resistance is expected at 240.5, and a move above this level could see prices testing 247.1.

Trading Ideas:

* Naturalgas trading range for the day is 224.3-247.1.
* Natural gas dropped amid expectations supplies will soon rise
* Recent increases in prices and demand prompted EQT, to start boosting output.
* US utilities added 74 billion cubic feet of gas into storage

Copper

Copper prices closed down by 0.83% at 849.65 amid a steadying U.S. dollar following the Federal Reserve's decision to postpone interest rate cuts until the year-end. The market saw increased copper arrivals at LME-registered warehouses in Taiwan and South Korea, driven by Chinese producers capitalizing on record LME prices in May to export their copper. This influx contributed to a 22% rise in LME copper inventories to 127,343 tonnes over the past month. The global copper market remains characterized by ample supply indicators. Inventories in Shanghai Futures Exchange-monitored warehouses are at over four-year highs, and spot premiums in China are weak, with the Yangshan import premium in negative territory. Despite this, a significant portion of global copper smelting capacity was offline in May, primarily due to maintenance, although some facilities have resumed operations since then. The International Copper Study Group reported a refined copper surplus of 125,000 metric tons in March, a decrease from February's 191,000 metric tons surplus. Global refined copper output in March was 2.33 million metric tons, slightly exceeding consumption of 2.20 million metric tons. Adjusting for inventory changes in Chinese bonded warehouses, there was a 138,000 metric tons surplus in March. On the demand side, China's unwrought copper imports surged by 15.8% year-on-year in May, surpassing expectations despite weak physical consumption. Import volumes totaled 514,000 metric tons, up 17.4% from the previous month, reflecting robust demand amid high copper prices. Technically, the copper market shows signs of fresh selling, with a slight increase in open interest by 0.5% to 6,236 contracts while prices fell by 7.15 rupees. Support levels for copper are identified at 846.3, with potential downside testing towards 842.8. Resistance is expected at 852.3, and a breakout above this level could push prices towards 854.8.

Trading Ideas:

* Copper trading range for the day is 842.8-854.8.
* Copper dropped amid rising inventories that highlighted a supply surplus.
* Peru's copper production in April fell 8.2% year-on-year to total 203,905 metric tons.
* Copper inventories in warehouses monitored by the SHFE dropped 1.8% from June 7.

Zinc

Zinc prices closed higher by 0.88% yesterday at 257.6, driven by short covering activities following recent declines, particularly as China's imports of zinc concentrates experienced a significant drop in the first four months of 2024. China imported 1.18 million metric tons of zinc concentrates during this period, marking a 24% decrease compared to the same period last year. This decline contrasts sharply with the import increases seen in 2022 and 2023, highlighting a shift in demand dynamics for raw materials. Global zinc production has been on a downward trend, with mines reporting a 2% decrease in 2022 and another 1% decline in 2023. The trend continued in the first quarter of 2024, with production slipping by 3% year-on-year according to the International Lead and Zinc Study Group. On the inventory front, LME stocks rose significantly throughout 2023, replenishing from 30,475 tons to 223,225 tons by year-end, and have increased further to 255,900 tons since January 2024. Despite fluctuations driven by warehouse arbitrage activities, LME stocks have generally held within a range of 250,000-260,000 tons since April. The global zinc market showed a surplus of 52,300 metric tons in March, down from 66,800 tons in February, as reported by ILZSG data. For the first quarter of 2024, the global surplus totaled 144,000 tons, lower than the 201,000-ton surplus recorded in the same period last year. Technically, zinc market sentiment has shifted to short covering, evidenced by a 6.8% decrease in open interest to settle at 2,098 contracts, while prices rose by 2.25 rupees. Currently, zinc finds support at 255.7, with potential downside testing at 253.8. Resistance is anticipated at 258.9, and a break above this level could see prices testing 260.2.

Trading Ideas:

* Zinc trading range for the day is 253.8-260.2.
* Zinc gains on short covering after prices dropped as China's imports of zinc concentrates fell sharply.
* Zinc output sliding 3% year-on-year in the first quarter
* LME stocks are at 255,900 tons, up 15% since the start of January.

Aluminium

Yesterday, aluminium prices closed lower by 0.43% at 231.5, influenced significantly by developments in inventory levels and global economic factors. LME inventories more than doubled in just a month, surging to 1.1 million tons, which contributed to market pressure. The widening discount between the LME cash aluminium contract and the three-month contract, reaching $62.44 per ton, marked the largest since August 2007, reflecting bearish sentiment and oversupply concerns. Market sentiment was further impacted by the U.S. Federal Reserve's decision to hold interest rates steady, postponing potential rate cuts to possibly as late as December. This delayed timeline, coupled with better-than-expected Chinese export data for May, tempered concerns about global demand but highlighted weaknesses in domestic consumption with slower import growth. However, supply disruptions in alumina production added a bullish undertone to the aluminium market. Shortages arose due to reduced output from China and force majeure declarations by mining giant Rio Tinto on alumina cargoes from Australian refineries amidst gas shortages. This situation raised concerns about the supply chain for aluminium production, despite global primary aluminium output rising by 3.3% year-on-year in April according to the International Aluminium Institute (IAI). Looking technically, the market witnessed fresh selling with a slight uptick in open interest by 0.13% to 3,038 contracts, while prices dipped by 1 rupee. Aluminium is currently supported at 230.4, with potential downside testing at 229.2. Resistance is expected at 232.6, and a breakout above this level could lead to further testing around 233.6.

Trading Ideas:

* Aluminium trading range for the day is 229.2-233.6.
* Aluminium dropped as LME inventories more than doubled in just a month
* The discount of the LME cash aluminium contract to the three-month contract expanded to $62.44 a ton.
* China’s May trade data showed better-than-expected exports, suggesting factory owners were managing to find buyers overseas

Cotton

Cotton prices, represented by Cottoncandy, closed marginally lower by 0.18% at 56,100, following a USDA report indicating ample supply amid subdued demand conditions. The report for the 2024/25 season highlighted increased beginning and ending stocks in the U.S., with projections unchanged for production, domestic use, and exports. The average upland farm price for the new season decreased to 70 cents per pound due to declines in new-crop cotton futures. Globally, the 2024/25 cotton balance sheet showed higher beginning stocks, production, and consumption, with world trade remaining steady. However, world ending stocks were raised to 83.5 million bales, reflecting a surplus in supply despite adjustments in production and consumption across different regions. Domestically in India, cotton planting for the kharif 2024 season has commenced in southern states like Karnataka, Telangana, and Andhra Pradesh, supported by early monsoon rains. However, planting in North India is expected to decrease due to factors such as pest infestations and rising labor costs, impacting overall acreage. In trading specifics, Rajkot's spot market reported a decline of 0.75% in cotton prices, ending at 26,732.7 Rupees per candy (356 kg). This decline mirrors the broader sentiment of subdued demand and ample supply influencing price movements. Technically, the cotton market is experiencing fresh selling pressure, with a modest increase in open interest by 1.1% to 368 contracts while prices declined by 100 rupees. Support levels for Cottoncandy are identified at 55,760, with potential downside testing towards 55,410. Resistance is currently at 56,480, and a breakout above this level could push prices towards 56,850.

Trading Ideas:

* Cottoncandy trading range for the day is 55410-56850.
* Cotton dropped after USDA report showed more than enough cotton than demand.
* China's agriculture ministry raised its forecast for cotton imports in the 2023/24 crop year by 200,000 metric tons
* The 2024/25 U.S. cotton projections show higher beginning and ending stocks compared to last month.
* In the global 2024/25 cotton balance sheet, beginning stocks, production and consumption are increased.

Turmeric

Turmeric prices closed higher by 0.74% yesterday, settling at 18180, driven by farmer withholding of stocks amidst anticipation of further price increases. However, gains were tempered by increased supplies towards the end of the harvesting season. The prevailing heat wave across India poses a threat to crop yields, potentially exacerbating supply constraints and supporting prices. The India Meteorological Department's forecast of continued heat wave conditions indicates limited respite, with below-normal rainfall over southern regions in April compounding agricultural challenges. In terms of production, the Ministry of Agriculture and Farmers’ Welfare's estimate for 2023-24 projects turmeric production at 10.74 lakh tonnes, down from 11.30 lakh tonnes the previous year. This reduction in output, coupled with demand destruction due to price surges, has impacted market dynamics. Regions such as Sangli, Basmat, and Hingoli are witnessing heightened demand for quality turmeric, driven by expectations of increased sowing area in the current year. On the trade front, April 2024 saw a decline in turmeric exports to 14,109.09 tonnes from 17,432.83 tonnes in March 2024, and a larger drop compared to April 2023's exports of 19,590.87 tonnes. Import figures, however, showed a significant increase in April 2024 to 3,588.11 tonnes from 1,227.28 tonnes in March 2024, reflecting a rise compared to April 2023's imports of 535.29 tonnes. Technically, the turmeric market observed fresh buying interest as indicated by a 0.43% increase in open interest to settle at 21,200 contracts. Prices surged by 134 rupees, with support now established at 17930. A breach below this level could test 17680, while resistance is anticipated at 18340, with potential upside targeting 18500 upon breaking above this level.

Trading Ideas:

* Turmeric trading range for the day is 17680-18500.
* Turmeric gains as farmers are holding back stocks in anticipation of a further rise.
* The current heat wave could severely damage the crop yield, further contributing to the supply crunch.
* The Ministry of Agriculture first advance estimate for turmeric production in 2023-24 is estimated at 10.74 lakh tonnes
* In Nizamabad, a major spot market, the price ended at 18175.15 Rupees gained by 0.2 percent.

Jeera

Jeera prices closed higher by 0.76% at 27,880 amid strong domestic and export demand coupled with tight global supplies. The market sentiment was bolstered by farmers holding back stocks in anticipation of better prices, contributing to the upward movement. However, the upside was capped by expectations of increased production this season, projected to be 30% higher at 8.5-9 lakh tonnes due to expanded cultivation areas in Gujarat and Rajasthan. Globally, jeera production has surged, particularly in China where output more than doubled to 55-60 thousand tons from previous levels. Similarly, countries like Syria, Turkey, and Afghanistan are gearing up for higher production with new seeds expected to enter the market soon. This influx of supply is expected to exert downward pressure on prices despite current bullish trends. In India, the sowing area for jeera has seen substantial increases, with Gujarat witnessing a remarkable 104% rise and Rajasthan up by 16%. This has led to record production estimates in Gujarat, signaling a robust harvest year for the spice. The increase in production has also influenced trade dynamics, with analysts predicting a significant rise in exports after a volatile period in 2023, when domestic prices surged. Technically, the jeera market witnessed short covering with no change in open interest, indicating traders covering their short positions as prices rose by 210 rupees. Support levels for Jeera are identified at 27,110, with potential downside towards 26,340. Resistance is currently at 28,370, and a breakout above this level could push prices towards 28,860.

Trading Ideas:

* Jeera trading range for the day is 26340-28860.
* Jeera gains amid robust domestic and export demand besides tight global supplies.
* China's cumin output soared to over 55-60 thousand tons from the previous 28-30 thousand tons.
* Turkey anticipates producing 12-15 thousand tons, while Afghanistan's output could double.
* In Unjha, a major spot market, the price ended at 28392.5 Rupees dropped by -0.16 percent.

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