May 24, 2010
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Natural gas down fourth day “The expectations are heat should be around the corner and if you are bullish you are looking forward to that. But the bottom line is that we are still in a situation where we have plenty of supply.” Brad Florer, a trader at Kottke Associates Inc., a commodity futures broker in Louisville, Kentucky, on natural gas “You could see gold go up another $1,000. All of the turmoil and problems we’ve seen in Europe is just another reminder that there’s a lot of value in gold as a safe haven”. Evan Smith, who helps manage $2 billion at U.S. Global Investors Inc. in San Antonio Commodities—Base metals rise on weaker Dollar and firmer equities Base metals closed higher on Friday as the Euro strengthened and the US equities settled higher in a volatile session. Euro rose 1.91% against the greenback and US Dollar Index at 85.37 was down 0.22%. Dow Jones Industrial Average Index rose over 1% after dipping to fresh cycle low. The US equities rose on the speculation sell-off due to sovereign debt crisis in Europe is overdone. The economic indicators out of Europe were mixed at the best. PMI services of France rose to 61.9 in May as against the forecast of 58.9,while PMI manufacturing index at 56.2 was lower than the forecast of 56.6. Germany’s services PMI data dipped to 53.7 from 55.2, while the manufacturing PMI data fell to 58.3 from 61.1.Germany’s IFO–the business climate data at 101.5 was lower than the forecast of 101.9; IFO–the current assessment data at 99.4 was lower than the forecast of 100. Euro zone’s services PMI data was better than expected, but the manufacturing PMI data was weaker than the forecast. China’s President Hu Jintao said that China will move gradually and independently in making changes to the nation’s exchange rate mechanism as talks with the US opened in Beijing today. The US Treasury Secretary Timothy F Geithner said today that a more market-driven currency
would help Chinese officials to sustain growth, keep inflation low and adjust the nation’s growth model. So far, China has resisted calls from its trading partners to let the Yuan strengthen after maintaining a peg of about 6.83 to the U.S. dollar for 22 months as a crisis policy. China is likely to delay rate tightening on sovereign debt crisis in Europe. Today’s US data releases include existing home sales (forecast 5.65 million, prior 5.35 million) for the month of April. Today, Euro is lower against the US Dollar. Euro is likely to fall further on Euro-zone’s sovereign debt crisis, however occasional rallies are not ruled out. We hold the similar view on the base metals and crude oil. Aluminium—Up 3.16% Aluminium closed with a gain of $63 at $2,055. Aluminum producers in China are operating at less than the cost of production after domestic prices fell and the government raised power rates for smelters, said Liu Xu, an analyst at China International Futures Co. China, the world’s largest maker of the metal, said earlier that it would raise power surcharges for some aluminum companies by as much as 100 percent from June, to curb overcapacity. China is cutting overcapacity as stockpiles of the metal in warehouses monitored by the Shanghai Futures Exchange have jumped 61% this year after smelters ramped up output on expectations demand will improve as the global economy recovers. This development is somewhat supportive for the metal. However in a negative development for the metal, it has been reported that China, the world’s largest aluminum producer and user, in April exported more of the metal than it imported for the first time since the end of 2008 as supply outpaced demand. Outbound shipments rose to 48,546 metric tonne, exceeding imports of 28,987 tonne, according to data from the Beijing-based Customs General Administration. Foreign shipments totaled 2,212 tonne in March and 118 tonne in
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April 2009. China’s aluminum production capacity will expand 20% this year, Neil Buxton, managing director at London-based researcher GFMS Metals Consulting, said on May 21.
The metal has support at Rs86.95, while the resistance is at Rs91/Rs92.70.
Aluminium is likely to fall further after trading sideways in the near future.
Lead closed with a gain of $66 at $1,811.
Lead—Up 3.78%
Barclays expects lead to remain in surplus this year, however the bank forecasts that the market would tighten in later 2010.
The support is at Rs93.95/Rs91.30, whereas the resistance is at Rs96.
The support is at Rs82.80/Rs80.25, whereas the resistance is at Rs84.05/Rs86.65.
Copper—Up 3.55% Copper closed with a gain of $235 at $6,845.
Precious metals—flat to lower
The Shanghai Futures Exchange (SHFE) stockpiles fell over 2,000 tonne.
The precious metal complex ended mixed as gold was slightly lower, while silver was steady.
Grupo Mexico SAB, the largest mining company in Mexico, sees copper prices extending their recovery amid “very strong demand from China.” “In May, we expect an extremely good copper import demand from China,” Chief Financial Officer Daniel Muniz said in an interview May 21. Possible Chinese monetary policy changes “will not impact Chinese copper demand,” he said. Muniz said there will be a copper deficit this year, without elaborating. “Inventories keep falling,” he said. “The inventories are very low in respect of global demand.” “In order to be congruent with our positive vision, we’re not hedging this year,” Muniz said. “We believe there are very strong fundamentals to support the price.”
Gold—Down 0.44%
The support is at Rs320.65/Rs316.40, whereas the resistance is at Rs324/Rs332.
Gold is likely to range-trade. It can correct lower to Rs17,612 level before it starts rising again, however our outlook remains bullish only.
Gold closed with a loss of $5.25 at $1,177.1. The metal fell to its intra-day low of $1,166.30 as Euro rallied. CFTC data shows that the non-commercial traders reduced their net long positions by 4,155 lots to 281,985 lots, while the commercials pared their net short position by 2,900 contracts. Today, gold is ticking higher as Euro is down after the Spanish government comes to the rescue of a small savings bank over the weekend and traders refocus on the risks associated with the banking system in the euro zone.
Nickel—Up 2.15%
The support is at Rs17,988/Rs17,943/Rs17,777, whereas the resistance is at Rs18,230.
Nickel closed with a gain of $450 at $21,350. The Public Procurement Service said that South Korea has bought 300 tonne of nickel cathode via tenders at a premium of $670 to $1,095.
Silver—steady Silver closed steady at $17.655.
The support is at Rs1,012/Rs994, while the resistance is at Rs1,026/Rs1,039.
Silver is likely to range-trade,however we think that the metal could correct lower to Rs27,500 level.
Zinc—Up 1.12%
The support is at Rs28,274/Rs27,956, while the resistance is at Rs28,820/Rs29,200.
Zinc closed with a gain of $21 at $1,891.
Energy complex—lower
China’s rising power cost point is applicable for zinc too, however rising production and inventory level are keeping the upside capped.
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Both crude oil and natural gas closed lower on demand concerns.
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May 24, 2010
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Crude oil—Down 1.07%
Natural gas—Down 1.72%
Crude oil closed with a loss of $0.76 at $70.04.
Natural gas closed with a loss of $0.07 at $4.035.
Crude oil fell as European governments struggled to contain the region’s debt crisis, raising concern that it will slow the global economic recovery.
Natural gas futures fell for a fourth day after a report showed the biggest weekly increase in US drilling rigs in 11 weeks, indicating supply will be ample to meet summer demand for the power-plant fuel. Rigs drilling for natural gas rose for the first time in three weeks, gaining 18 to 969 in the week ended on May 20, the Baker Hughes Inc. report showed. It was the biggest increase since the total rose by 21 in the week ended March 05.
High inventories have driven down the profit margin from refining crude into gasoline and heating oil from a 15month high. The crack spread for July has dropped 14% this week, based on Nymex futures prices. U.S. gasoline production in April rose to the second- highest monthly total on record, according to the American Petroleum Institute. High level of US inventories and European sovereign debt concerns are negative for the counter, however approaching driving season could support the counter at lower levels. We see crude oil falling to $60 level in this cycle. The support is at Rs3,240 while the resistance is at Rs3,303/Rs3,355.
US gas stockpiles rose 76 billion cubic feet last week to 2.165 trillion cubic feet, the Energy Department said Thursday. The five-year average increase for the week was 93 billion. The total was 17% above average. Cooling requirements in the US will be 36% higher than normal tomorrow through May 28, according to Weather Derivatives of Belton, Missouri. As such high level of inventories and concerns about demand on European crisis are negative for the counter, however approaching cooling demand season should support the prices. Natural gas has support at Rs181, whereas the resistance is at Rs191.30/Rs194.20.
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