8th June The Week That Was

Transcription

1 8th June 2015 The Week That Was

2 US monetary policy remains the largest headwind for gold In essence, the lack of a clear price direction recently reflects the uncertainty about the timing and scale of the first rate hike by the US. While the minutes of the April FOMC meeting almost rule out a hike in June, recent comments by Chairman Yellen suggest that a rate increase in later this year is still on the table. Our current assumption is that the Fed will announce its first rate hike in September. This also explains the renewed price weakness in our projections for Q3 15, as selling pressure in gold is likely to build up in the run up to the FOMC meeting. However, taking into account gold s relatively resilient performance in Q1 amid a sharp rise in the dollar and probable bargain hunting from Asia on dips, the downside for the yellow metal is likely to be limited. INR to weaken further reuters poll suggests The Indian rupee will weaken to its lowest in several years over the next 12 months as the economy struggles to pick up momentum and on expectations that an impending rise in U.S. interest rates will keep the dollar on a steadily strengthening path. The rupee has largely held its ground against a surging dollar so far, falling just 1.5 percent since the start of the year even as the Reserve Bank of India cut interest rates three times in an effort to shore up the economy, most recently on Tuesday. The poll of about 30 foreign exchange analysts this week showed the rupee will trade at per dollar by end- June, in six months and weaken to in a year. It was trading around against the dollar on Friday. Currency Currency Last Bid USD/INR EUR/USD USD/JPY GBP/USD Dollar Index Economic Releases This Week Data/Event Expected Previous Impact US Core Retail Sales (11/6) 0.7% 0.1% Positive US Jobless Claims (11/6) 277K 276K Neutral US Core PPI (12/6) 0.4% -0.4% Negative Market movement Time Medium 18:00 Medium 18:00 Medium 18:00

3 Gold at 11-week low on US data Gold hit an 11-week low on Friday, heading for a third straight weekly slide, as the dollar rallied after better-than-expected U.S. employment data bolstered prospects for an interest rate increase this year. Non-farm payrolls increased 280,000 last month, the largest gain since December, above the 225,000 that economists polled by Reuters had expected. Spot gold fell as much as 1.2 percent to its lowest since March 19 at $1,162.35, heading for a 1.6 percent weekly fall, the third straight decline and the biggest since April 24. The DXY rose 1.5 percent versus a basket of currencies after the data, seen as a key barometer of the U.S. economy. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies, while higher interest rates would hit demand for the non-interest-paying metal. World's biggest gold ETF looses place in US top 10 International Exchanges Commodity Exchange Price($) WTI Crude NYMEX Natural Gas NYMEX Gold COMEX Silver COMEX Copper (3M) LME Aluminium (3M) LME 1750 Nickel (3M) LME Lead (3M) LME Zinc (3M) LME 2130 The world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares GLD, is no longer one of the top 10 U.S.-listed ETFs by value, according to data from FactSet. The value of the GLD fund, which issues securities backed by physical bullion, dwindled to $ billion this week, data on its website showed, as its gold holdings fell to their lowest since mid-january at tonnes. That makes it the 12th largest fund by value listed by ETF.com, which uses FactSet data. At its peak in August 2011, a month before gold prices hit a record high of $1, an ounce, its value reached $77.5 Member: billion. MCX: 16500, NCDEX: 00119

4 Copper steady after falling to a 6 week low Copper steadied on Friday as falling stockpiles countered the impact of a strong dollar and offset concerns over an expected seasonal demand slowdown in China that pushed prices to a six-week low earlier in the session. Daily London Metal Exchange data showed copper stocks fell to 315,125 tonnes, their lowest point since early March and further denting long held expectations that the copper market will record a large surplus this year. The strongest quarter for demand in China, the world's top copper consumer, is passing its peak, with factories eyeing a summer production slowdown. But some analysts believe falling copper stocks show that demand might not actually be that thin. OPEC agress to keep pumping oil despite glut fears Oil group OPEC agreed to stick by its policy of unconstrained output for another six months on Friday, setting aside warnings of a second lurch lower in prices as some members such as Iran look to ramp up exports. MCX Commodity Expiry Close(INR) Crude Oil June 3742 Natural Gas June Gold August Silver July Copper June Nickel June Lead June Zinc June Aluminum June With oil prices having rebounded by more than a third after hitting a six-year low of $45 a barrel in January, officials meeting in Vienna saw little reason to tinker with a strategy that seems to have resurrected moribund growth in world oil consumption and put a damper on the U.S. shale boom.

5 Rains expected to hamper Brazil sugar production Heavier-than-expected rains forecast for Brazil's main cane growing region could hamper sugar output from the world's top exporter, experts say. If weather remains wet through the region's dry season, mills will also have to process cane beyond the typical eight-month crushing period, which usually ends in November, or worse, be forced to leave mature cane in the field until next season. Any significant cuts in sugar output from the expected 31.8 million tonnes in will eat into the global glut and may help boost prices that are near 6-1/2-year lows of roughly 12 cents per lb. Skymet provides hope of a normal monsoon Giving hope amid the gloom, private weather forecasting agency Skymet has predicted "normal" rains after the Indian Meteorological Department (IMD) forecast "deficient" monsoon this year, raising the spectre of a drought.the agency has also downplayed the El-Nino factor, saying the chances of the phenomenon affecting rainfall were remote. El-Nino leads to abnormal warming of the equatorial Pacific Ocean which triggers both floods and drought in different parts of the world. In its February forecast, the Skymet had said India would have a normal monsoon with rainfall of 104 to 100 per cent of the Long Period Average (LPA). He also added "climatologically", back to back droughts are rare in nature and, in the last 140 years, it has been witnessed only four times - in , , and NCDEX Commodity Expiry Close Castor Seed June 3955 Chana June 4620 Jeera June Soyabean June 3967 Cocud June 1756 Kapas April 907 MCX Commodity Expiry Close Cardamom June CPO June Mentha Oil June

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