Weekly Report: Metals & Energy ( Nov 27 Dec 1, 2017)

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1 Weekly Highlights Inside this issue: Highlights 1 Week Ahead 1 Weekly Levels 2 Bullion Fundamental 3 Bullion Technicals 4 Base Metals Overview Energy Fundamentals Energy Technicals 8 US Economic Calendar 9 Gold prices slid lower on Friday as some investors took profits at the end of the week, but losses were held in check by the weaker dollar. For the week, gold prices ended down 0.71 per cent. At COMEX and at MCX it lost 1 per cent. Silver at COMEX lost 1.69% for the week, its first weekly decline in three weeks. The minutes echoed comments by Fed Chair Janet Yellen earlier in the week that she was uncertain about the inflation outlook. While a rate hike in December is still almost fully priced in, investors pared back expectations for further rate hikes in 2018, sending the dollar lower. London copper touched a one-month high above $7,000 a tonne on Monday, amid signs of resilience in China's industrial sector that suggested a cooling, but still healthy, appetite for metals. For the week it has surged more than 3 per cent at LME and at MCX 2.75 per cent. Unionized workers at BHP Billiton Plc's Escondida copper mine in Chile, the world's largest, ended a 24-hour strike on Friday but could put down their tools again next week over the company's planned layoffs Steel dependent metal nickel posted gains last week at MCX and LME in step with a stronger sign showing in Chinese steel prices. Nickel is chiefly used in making stainless steel. For the last week prices rallied more than 3.5 per cent. LME zinc climbed to its highest in two weeks on Wednesday on persistent concern about shortages and after Chinese steel futures rallied. For the last week, LME zinc prices surged by 1.5 per cent but at MCX prices could not gain commensurately, due to strong domestic currency. Despite the lingering bearish sentiment, Aluminium prices managed to close higher for the last week as there was low participation due to holiday in most parts of the world. For the week, LME aluminium gained by almost 1 per cent. Crude oil prices finished higher in an abbreviated session on Friday, with the U.S. benchmark surging to its best level since July 2015, as the shutdown at North America's Keystone pipeline continued to cut deliveries to storage facilities. For the week, WTI crude gained about 4.2%, while Brent marked a climb of about 1.8%. At our domestic bourse MCX, crude prices surged by 4%. A day after the API helped prop WTI up by reporting a mb inventory draw, the EIA chimed in, reporting a much smaller decline of 1.9 mb in crude oil inventories for the week to November 17. The number of rigs drilling for oil in the US rose by 9 to 747 last week. Market participants will focus on the Organization of Petroleum Exporting Countries highly-anticipated meeting on Thursday to see whether major producers plan to extend their current production-cut agreement. Natural gas futures plunged sharply lower last week after forecasts for a warm start to December raised concerns over whether the U.S. will experience its third straight year of mild winter temperatures. For the week, futures lost 9.2%, marking the largest weekly percentage drop since the period ended Feb. 3. In the week ahead, the changing of the guard at the Federal Reserve will be a big focus for investors, with investors awaiting comments from a number of Fed speakers, including both the current chair and next head of the U.S. central bank. US GDP data will also be in focus this week. Week Ahead Buy : Natural Gas Weekly Report: Metals & Energy ( Nov 27 Dec 1, 2017) Inventories totaled trillion cubic feet as of November 17, according to the Energy Information Administration. Stockpiles are 3.1 percent below the five-year average and 7.9 percent below the year earlier. Record exports of U.S. gas to Mexico and overseas may help slow down the price decline, increased production from shale basins have also reached an all-time high. 1

2 WEEKLY LEVELS Commodity S1 S2 R1 R2 GOLD SILVER COPPER ZINC NICKEL ALUMINIUM LEAD CRUDE OIL NATURAL GAS(DEC)

3 BULLION FUNDAMENTALS Precious Metals GOLD Gold futures for December delivery settled down 0.32% on Friday at $1, on the COMEX division of the New York Mercantile Exchange. For the week, gold prices ended down 0.71%. The U.S. dollar index, which measures the greenback s strength against a trade-weighted basket of six major currencies, was down 0.34% to in late trade. For the week, the index was down 0.93%, its third consecutive weekly decline. A weaker dollar typically tends to support gold, which is denominated in the U.S. currency and becomes more affordable to foreign buyers when the dollar declines. The dollar remained on the back foot after Wednesday s minutes of the Federal Reserve s November meeting showed that some officials were concerned inflation would stay below the bank's 2% target for longer than expected. While a rate hike in December is still almost fully priced in, investors pared back expectations for further rate hikes in 2018, sending the dollar lower and supporting gold prices. In the week ahead, direction for the gold prices shall be governed by key fundamental factors including that of changing of the guard at the Federal Reserve, U.S data on personal income and spending, which includes the personal consumption expenditures inflation data. SILVER Silver followed gold lower and was down 0.61% at $17.00 a troy ounce late Friday, silver lost 1.69% for the week, its first weekly decline in three weeks. Silver prices were supported by weaker dollar amid the minute s echoed comments by Fed Chair Janet Yellen earlier in the week that she was uncertain about the inflation outlook. The major silver miners fared fine in Q3 despite some real challenges. A combination of silver continuing to seriously lag gold, along with anomalous companyspecific problems, weighed on miners' results. The ishares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR), which are backed by physical silver bullion, have traded slightly lower since the start of the fourth quarter and year-to-date performances for the silver ETFs are well behind competing gold funds. 3

4 Precious Metals BULLION TECHNICALS GOLD Gold prices retreated last week while paring some gains of last two-week s rally. Prices came down nearly 1 percent for the week gone by but remained supported near lower levels. Moving towards next week, prices may resume upside for higher levels with immediate support at Rs.29250/10gms. Also, Rs.29000/10gms will act as a key support for prices. On the higher side, trend looks even better if prices step up above Rs.29550/10gms and $1300/oz psychological level that would give confidence to traders and can lift metal higher towards Rs.29750/10gms as immediate and for Rs.29950/10gms as next target level. Hence, one can look for buy trade near Rs.29350/10gms level while considering mentioned levels to settle the trade. SILVER White metal witnessed a sideways low volume week with bearish biasness closing lower 772 points or 1.93% down at Rs.39241/Kg on MCX. Silver spot on COMEX settled at $17.02 after losing 1.62% for the week, its first weekly decline in three weeks. On weekly charts, biasness is bearish as price trades well below its 20 EMA. Prices are forming narrow range overlapping candles as the metal trades in a clear defined sideways range between Rs.39200/Kg and Rs.39650/Kg.Traders are advised to short close to Rs.39500/kg for downside targets of Rs.39100/kg and Rs.38800/kg keeping stops above Rs.39700/Kg. Upper range level Rs.39700/kg will act as a key reversal level above which trend will change to upside. Traders can reverse to long position on convincing break of Rs.39700/kg if price breaches that mark for upside targets of Rs.40000/kg keeping a fresh stoploss of Rs.39400/kg 4

5 Base Metals BASE METALS OVERVIEW FUNDAMENTALS Copper prices rose to their highest in nearly a month on Friday, supported by the weaker dollar. On MCX, copper prices gained around 12.1 points to settle the week higher 2.75% at Rs.452.1/Kg. Copper for December delivery was up 1.21% at $3.175 in late trade, its highest settlement since October 26. A weaker dollar and a pickup in global growth have pushed copper prices up almost 27% this year. Last Friday, London copper edged higher for a fifth straight day overnight with the help of U.S. dollar weakness against other currencies. The dollar wobbled in thin trading in Asia, sidelining local investors hoping to boost positions with a stronger home currency. Profits earned by China's industrial companies in October rose 25.1 percent from a year earlier, slowing from a 27.7 percent gain in September. The prices are supported by demand from the industrial sector. Shanghai Futures Exchange copper rose 0.7 percent to 54,500 yuan ($8,252) a tonne, having struck its highest in around three weeks. Steel-dependent metal nickel gained 3.79 percent last week in London markets in step with a stronger showing in Chinese steel futures. Metal was also finding support from stronger ShFE rebar futures. Wood Mackenzie estimated nickel demand in EV batteries will rise to about 220,000 tonnes in 2025 from about 40,000 tonnes last year. Total global demand of about 2 million tonnes this year is forecast to rise to 2.2 million tonnes by Berlin told an investors presentation last week that Nornickel, Russian nickel and palladium mining and smelting company, expects the market to remain fairly balanced in the longer term and able to supply all the nickel needed, including that for rechargeable batteries, for the next five years. London nickel led metals lower this week on Monday, as investors cut their exposure to risky assets as Beijing steps up a crackdown on shadow banking and other riskier forms of financing. China will check local governments' investment in railway projects, the state planner said on Friday, amid official concerns that breakneck infrastructure spending is racking up too much debt. Copper Technicals Copper prices got bounce from support zone and advanced 2.75 percent for last week. Counter has witnessed strong base near Rs /kg levels that worked as springboard for prices as they tested it multiple times. This base will be area of concern for bears and need to be taken out if they want grip in their hand. However, prices are still not able to hold above the supply zone of Rs.454/kg level that made prices to revolve in the given range. On technical check, prices are trading above 50 day EMA and MACD is placed in positive zone. This gives a sense of positive sentiment and need to be respected as per the trend. For the next week, traders can buy copper near Rs.444/kg levels for target price of Rs.454/kg level with stop loss of Rs.439/kg odd level. Nickel Technicals Counter was up nearly 3 percent last week while bouncing off as counter reaction of two-week sell off. Though, we have seen decent counter rally, but prices were not having enough strength to place themselves above Rs.780/kg resistance level. This hurdle is still intact and will be a pain for bulls in coming days that can let prices to further slip towards Rs.735/kg levels, a strong support available for metal. Also, oscillators are supporting the fact that weakness is not over for the counter. As a strategy, traders can use this pull back as an opportunity to short sell the counter near Rs.760/kg levels for target price of Rs.735/kg level while having a caution above Rs.780/kg level. 5

6 Base Metals BASE METALS OVERVIEW FUNDAMENTALS LME zinc climbed to its highest in two weeks on Wednesday on persistent concern about shortages and after Chinese steel futures rallied. For the last week, LME zinc prices surged by 1.5 per cent but at MCX could not gain commensurately due to strong domestic currency. Zinc, mainly used for galvanizing steel, got support after Chinese steel futures rallied for a third straight session on Wednesday. The global zinc market deficit widened to 39,800 tonnes in September from a revised deficit of 38,700 tonnes in August. Environmental inspections in China, the world s top zinc-producing country, have resulted in reduced production or the closure of many zinc mines across the country, fueling shortage concerns. Aluminium prices fell on Tuesday last week to three month low on expectations that the pace of supply cuts from top producer China would slow and demand growth weaken. However, despite the lingering bearish sentiment prices managed to close higher for the last week as there was low participation due to holiday in most parts of the world. For the last week LME aluminium gained by almost 1 per cent. Binzhou, home to top global aluminium maker China Hongqiao Group, last month ordered 2.57 million tonnes of annual smelting capacity to be closed during the coming winter, though part of that may already have been closed as part of a clampdown on illegal smelting. China s aluminium production in October was million tonnes, down from million tonnes in September, data from the International Aluminium Institute (IAI) showed on Monday last week. Last week, lead surged more than 1.5 per cent at LME and more than 1 per cent at MCX, after a report from ILZSG showed that the global lead market showed a deficit of 38 K tonnes in September after a surplus of 15.7 K tonnes in August. For January to September, the lead market had an output deficit of 142,000 tonnes compared with a surplus of 41,000 tonnes in the same period last year. Zinc Technicals It was an inside bar on weekly chart with a positive close of 0.84 percent gains. Activity within the preceding week s bar shows indecisiveness of traders that made price range limited. However, prices are still above the 50 day EMA and have been moving higher with the same support in the recent past. Furthermore, unwinding of long trades could be seen if prices break below the support area defined near Rs.205/kg levels. As of now, prices look top heavy with upside capped near Rs /kg zone, which may result in selling pressure building in the counter. As a trade, one can sell zinc near Rs.210/kg while projecting Rs /kg level as downside target and placing stop loss above Rs.213/kg level. Aluminium Technicals Aluminium prices recovered from 8-week s lows and settled nearly half a percent up for the week gone by. Prices got support at 100 day EMA and bounced smartly that shows buying interest of traders on lower levels. Also, RSI has inched up from 30 level that could attract technical demand at this point. Level wise, prices have firm base at Rs /kg level and can see up rise towards immediate hurdle at Rs.139/kg mark whereas a break above the same could lead to Rs.142/kg level as next major supply zone. Having said that, we recommend to buy aluminium near Rs /kg level with stop loss of Rs /kg level for upside target of Rs.139/kg levels. Lead Technicals Heavy metal recovered from its lows on Friday to close the week higher 1.6 points or 1.01% at Rs /kg on MCX. Prices faced stiff resistance at key supply level of Rs.161/kg and started a fresh decline. On daily charts, prices are trading well below its 20 EMA forming lower lows confirming biasness of the week ahead as bearish. On hourly charts, prices are taking minor support at Rs /Kg mark which may push prices up to retest the resistance mark of Rs.161/kg.Traders are advised to build short position close to resistance level at Rs.160/kg for downside targets of Rs.155/kg keeping stops above Rs.162/kg. 6

7 Energy ENERGY FUNDAMENTALS CRUDE OIL Crude oil prices finished higher in an abbreviated session on Friday, with the U.S. benchmark surging to its best level since July 2015, as the shutdown at North America's Keystone pipeline continued to cut deliveries to storage facilities. For the week, WTI crude gained about 4.2%, while Brent marked a climb of about 1.8%. At our domestic bourse MCX, crude prices surged by 4%. The disruption to the Keystone pipeline connecting Canada s Alberta oil sands to U.S. refineries has reduced the usual 590,000 barrel-per-day flow to U.S. refineries, driving down inventories at the storage hub of Cushing, Oklahoma Flow from the pipeline, which was shut on Nov. 16 following a 5,000-barrel spill in South Dakota, was expected to be reduced by 85% through the month end. A day after the API helped prop WTI up by reporting a mb inventory draw, the EIA chimed in, reporting a much smaller decline of 1.9 mb in crude oil inventories for the week to November 17. The number of rigs drilling for oil in the U.S. rose by nine to 747 last week, Baker Hughes reported. Crude prices were further supported by growing signals that the OPEC and its allies will agree to prolong supply curbs when producers meet in Vienna at the month end. Russia said that it is ready to support extending a deal among oil producers on output cut, but did not mention how long this should last beyond its March expiry. Under the original terms of the deal, OPEC and 11 other non-opec producers, led by Russia, agreed to cut output by about 1.8 million barrels per day for the first six months of The agreement was then extended back in May of this year for a period of nine more months until March The OPEC-led cuts have been one of the key catalyst supporting the recent rally amid expectations that rebalancing in crude markets is well underway. In the week ahead, market participants will focus on the Organization of Petroleum Exporting Countries highly-anticipated meeting on Thursday to see whether major producers plan to extend their current production-cut agreement. NATURAL GAS Natural gas futures plunged sharply lower last week after forecasts for a warm start to December raised concerns over whether the U.S. will experience its third straight year of mild winter temperatures. For the week, futures lost 9.2%, marking the largest weekly percentage drop since the period ended Feb. 3. The price action late in the week was primarily driven by a midday update to the government s Global Forecast System weather model which indicated a much too warm pattern through December 6, despite a couple of cool shots across the northern tier of the country, according to NatGasWeather.com. In other news, inventories totaled trillion cubic feet as of November 17, according to the Energy Information Administration. Stockpiles are 3.1 percent below the five-year average and 7.9 percent below the year earlier. Record exports of U.S. gas to Mexico and overseas may help slow down the price decline, increased production from shale basins have also reached an all-time high. This week will be all about the weather and the forecast shows no days where temperatures are at least significantly below normal in the 15-day forecast. 7

8 Energy ENERGY TECHNICALS CRUDE OIL Bulls continued to thrash bears as oil rallied to close the week up by 146 points or 3.99% at Rs.3807/bbl on MCX. U.S. West Texas Intermediate (WTI) crude futures settled at $58.95 a barrel by end of the week gaining about 4.2%, levels not seen since the summer of Uptrend is intact on weekly and daily charts with price marking higher highs. Up move however looks exhausted as price approaches key weekly resistance of Rs.3780/bbl and is reluctant to move higher. A short term retracement can trigger from here taking price to lower supports of Rs.3700/bbl from where fresh buyers will jump in. Traders are advised to build long position close to EMA 20 support of Rs /bbl ($58/bbl on NYMEX) for upside side targets of Rs.3850/bbl keeping stops below Rs. 3680/bbl. NATURAL GAS Bears burnt gas ruthlessly to close the week lower 19.9 points or 9.48% at Rs.190/mmbtu on MCX. Natural gas futures settled at $2.813 per million British thermal units on NYMEX. For the week, futures lost 9.2%, marking the largest weekly percentage drop since the period ended Feb 3,2017. Price declined sharply with strong downtrend on daily charts. However, prices bottomed out on Friday as fresh buyers stepped in at lower levels as confirmed by strong volumes close to recent lows of Rs /mmbtu.On hourly charts, prices formed a higher low higher high pattern confirming that sellers are now exhausted and gas is ready to rally making biasness of week ahead as bullish. Traders are advised to build long position near Rs / mmbtu in Dec contract on MCX ($2.95/mmbtu on NYMEX) mark for upside targets of Rs.199/mmbtu keeping stops below Rs.187/mmbtu. 8

9 Date Time Name For Consensus Previous Importance 27-Nov 20:30 New Home Sales Oct K 667 K Very High 28-Nov 19:00 Goods Trade Balance Oct. 17 $ B $ B Very High 28-Nov 19:00 Wholesale Inventories Oct % 0.3% High 28-Nov 19:30 House Price Index Sep % High 28-Nov 19:30 S&P/CS HPI Composite Oct % 5.9% High 28-Nov 20:30 CB Consumer Confidence Nov Very High 29-Nov 19:30 GDP Q % 3.0% Very High 29-Nov 20:30 Fed Chair Yellen Testifies Very High 29-Nov 20:30 Pending Home Sales Oct % 0.0% Very High 29-Nov 21:00 EIA Weekly Crude Oil Stocks Change w/o 24 Nov Mb Mb Very High 30-Nov Tentative OPEC Meeting Very High 30-Nov 19:00 Initial Jobless Claims w/o 25 Nov 240K 239K Very High 30-Nov 19:00 Personal Income Oct % 0.4% High 30-Nov 19:00 Personal Spending Oct % 1.0% Very High 30-Nov 20:15 Chicago PMI Nov High 30-Nov 21:00 EIA Natural Gas Oil Stocks Change w/o 24 Nov Bcf Very High 1-Dec 20:15 Manufacturing PMI Nov Very High 1-Dec 20:30 Construction Spending Oct. 0.5% 0.3% Very High 1-Dec 20:30 ISM Manufacturing PMI Nov Very High 1-Dec 23:30 Baker Hughes Oil Rig Count w/o 24 Nov Very High US Economic Calendar Nov 27 Dec 1, 2017 Sugandha Sachdeva Gaurav Sharma Rahul Sharma In-charge-Metals, Energy & Currency Sr. Analyst, Metals, Energy & Currency Analyst, Metals & Energy Vipul Srivastava Amandeep Singh Analyst, Metals & Energy Analyst, Metals & Energy Research Team Source: Reuters, Investing.com, briefing.com ID: metals.research@religare.com Disclaimer: 9