Commodity Round UP
Bullions
Gold prices were little changed in North American trade on Monday, as market players continued to speculate over the timing of the next U.S. rate hike.
More disappointing U.S. economic data published Monday tempered expectations of a near-term interest rate hike by the Federal Reserve.
The Federal Reserve Bank of New York said that its general business conditions index fell to -4.2 this month from a reading of 0.55 in July. Analysts had expected the index to improve to 2.5 in August.
On the index, a reading above 0.0 indicates improving conditions, below indicates worsening conditions.
The downbeat data led investors to push back expectations for the next U.S. rate hike. Fed funds futures are currently pricing in just a 9% chance of a rate hike by September. December odds were at around 45%.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slumped to a more than one-week low of 95.19 on Friday. It was at 95.60 by early Monday.
In the week ahead, market players will be turning their attention to Wednesday’s minutes of the Federal Reserve’s July policy meeting for fresh clues on the timing of the next U.S. rate hike.
U.S. inflation data will also be in focus, as investors attempt to gauge if the world's largest economy is strong enough to withstand an increase in borrowing costs in the coming months.
Gold is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
For the year, the precious metal is up nearly 26%, boosted by concerns over global growth and expectations of monetary stimulus.
Energy
Oil prices rallied sharply for the third session in a row in North American trade on Monday, hitting a fresh three-week high amid indications major oil producers are reconsidering a collective production freeze in a bid to boost the market. According to media reports on Monday, Russia is opening up to an agreement with other major oil producers to freeze output in an effort to stabilize the market. Alexander Novak, Russia's energy minister, said his country is consulting with Saudi Arabia and other producers to jointly cap production "if necessary," Arabic newspaper Asharq al-Awsat reported. "We are cooperating in the framework of consultations regarding the oil market with OPEC countries and producers from outside the organisation, and are determined to continue dialogue to achieve market stability," Novak said.
Crude prices are up nearly 10% so far this month. Sentiment on oil received a leg up after comments from Saudi energy minister, Khalid al-Falih, late last week appeared to lend more credibility to the idea that OPEC might consider taking action to stabilize prices at a meeting in Algeria next month.
However, market players remained skeptical that the meeting would result in any concrete actions. An attempt to jointly freeze production levels earlier this year failed after Saudi Arabia backed out over Iran's refusal to take part of the initiative.
Despite recent gains, indications of an ongoing recovery in U.S. drilling activity combined with elevated stocks of fuel products around the world is expected to keep prices under pressure in the near-term.
According to oilfield services provider Baker Hughes, the number of rigs drilling for oil in the U.S. last week increased by 15 to 396, the seventh consecutive weekly rise and the 10th increase in 11 weeks.
The continued increase in U.S. drilling activity fueled speculation that domestic production could be on the verge of rebounding in the months ahead, underlining worries over a supply glut.
Base Metals
Base metals were in consolidation mode on Monday as the complex reacted to a spate of negative data from the US and China. The market has faced a series of disappointing data from China and the US of late. Late last Friday, data from the People’s Bank of China showed the country’s M2 money supply growing at 10.2 percent in July – the slowest pace since April 2015.
The figure was also lower than forecast of 11.1 percent and June’s reading of 11.8 percent. New loans at 464 billion yuan ($70 billion) in July – versus forecast of 900 billion yuan and June’s number of 1.38 trillion yuan – also showed new credit in the country growing at its most sluggish pace in two years. The data agenda is light today with Italy and France both absent for bank holidays. Later the US will release its empire state manufacturing index.
This week marks when the August date becomes prompt but nearby dates remained in a small contango despite the dominant position holder in the 50-79 percent.
“Copper enjoyed a quiet week – that is, until China data released Thursday evening sent the metal lower. China’s July data for a variety of indicators, including total social financing, property starts, and fixed-asset investment growth, was subpar and below expectations. This could be an early warning for a second-half period of weakness for copper,” Barclays Capital said.
Agri commodity
Rainfall deficit shrinks to 44% in Gujarat Rainfall deficit in Gujarat — among the driest places in the country during the current monsoon — has reduced to 44 per cent on average in the State as on August 11 against 65 per cent seen at the beginning of the month.
As a result of the widespread rains, sowing activity progressed in the State with nearly 82 per cent sowing completed of the 3-year average. As on August 8, 7,072,400 hectares has been brought under sowing area against the three-year average of 8,671,500 hectares.
The State has received 188 mm of average rains during August so far taking the total rainfall in the State to 449.34 mm. The State’s long period average (LPA) rainfall is 797 mm. (Source: HBL) China’s Insatiable Soybean Hunger Eats Into Record U.S. Crop U.S. farmers just can’t seem to grow enough soybeans to satisfy China.
For the third year in a row, U.S production is expected to set a record, the best such string since 1979. Yet, with output dropping elsewhere, a flurry of demand from China and other importers is eating away at stockpiles.
The result: For the first time in three years, domestic inventories are poised to drop below the previous season, according to analysts surveyed by Bloomberg. Soybeans are used to make everything from animal feed to cooking oil, soy sauce and tofu. Since 2005, China’s imports of the commodity have more than tripled, and it now buys more than 60 percent of the world’s exports.
The demand is primarily driven by its livestock sector as a growing middle class consumes more meat. (Source: Bloomberg)
India Palm Oil Imports Seen Falling Third Month Amid Soy Switch Palm oil imports by India probably fell for a third month in July as some buyers switched to soybean oil. Imports dropped 20 percent to 585,000 metric tons in July from a year earlier, according to the median of five estimates in a Bloomberg survey of processors, brokers and analysts. Total vegetable oil purchases rose 11 percent to 1.13 million tons as soybean oil imports more than doubled, the survey showed. The Solvent Extractors’ Association of India is set to release import data in the middle of the month. Soybean oil imports increased as its premium over palm declined, said Nagaraj Meda, managing director of Hyderabad-based TransGraph Consulting. Traders held off buying palm oil given that there were adequate edible oil stockpiles at ports, he said. (Source: Bloomberg)
Technical Levels
Gold
Support at 31000 and Resistance at 31450---31600
Looks weak below 31000, fresh selling can be initiated below it else could test its resistance level of 31450---31600
Above 31600 we can see more upside move till 31800---32000 mark in days to come.
Trade with levels only
Silver
Support at 45800---45400 and Resistance at 47400---47700
Above 46600 it can touch 47400---48000 marks else could test its support level of 45800---45400 again. Further downside panic will see only close below 45400 mark.
Trade with levels only
Crude oil
Support at 2970 and resistance at 3025. Close above 3025 will take to 3080----3130+ mark in days to come else it could test its support level of 2970 again.
Close below 2970 will take to 2920---2880 and then to 2850 mark.
Trade with levels only
Copper
Support at 317 and Resistance at 320---324
Looks weak below 317 we can see downside panic 313—310---306 marks in days to come else could test its resistance level of 320---324 again.
Fresh buying only above 324
Trade with levels only
Soyabean
Support at 3520 and resistance 3670
Below 3520 it can touch 3480—3400 mark or else could test its resistance level of 3670.
Further upside rally only above 3670
Trade with levels only
Economic Data
CPI y/y – 02:00
PPI Input m/m– 02:00 P.M
RPI y/y – 02:00 P.M
German ZEW Economic Sentiment – 02:30 P.M
Manufacturing Sales m/m – 06:00 P.M
Building Permits – 06:00 P.M
CPI m/m – 06:00 P.M
U.S Core PPI m/m – 06:00 P.M
Housing Starts– 06:00 P.M
Capacity Utilization Rate – 06:45 P.M
Industrial Production m/m – 06:45 P.M
Technical Pick
Sell Copper Below 317 Stop loss 320 Target 310
