Weekly Report: Metals & Energy ( Oct 23 Oct 27, 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 fell on Friday, pressured lower by the stronger U.S. dollar which was boosted after President Donald Trump's plans to overhaul the tax code cleared a critical hurdle. Gold futures for December delivery settled down 0.59% at $1, on the Comex division of the New York Mercantile Exchange. For the week, the precious metal was down 1.86%, which means it has fallen in five of the past six weeks. The dollar rose on Friday, making gold more expensive for holders of other currencies, after Senate Republicans approved a budget measure that will allow them to pursue tax cuts without support from the Democratic Party. Elsewhere in precious metals trading, silver was down 1.21% at $17.04 a troy ounce late Friday, bringing its weekly decline to 2.22% at COMEX. Among base metals, copper pared early gains and closed at $ at LME. The industrial metal was still up 1.11% for the week after Monday s rally to three-year highs on the back of upbeat Chinese economic data. The country accounts for almost half the world s copper consumption. Zinc hit a 10-year price peak of $3, a ton on the London market this month but last week it touched a low of $3,040 at LME. For the last week it has registered a weekly loss of around 4.5 per cent. US WTI crude oil prices settled higher in see-saw trade on Friday, as political tensions in the Kurdistan region continued to disrupt crude supplies. For the week, WTI prices rose about 0.8%, the second-straight weekly gain. Oilfield services firm Baker Hughes said Friday that its weekly count of oil rigs operating in the United States fell by seven to 736, the lowest level since June. The weekly rig count is an important barometer for the drilling industry and serves as a proxy for domestic oil production. U.S. commercial crude oil inventories decreased by 5.7 million barrels from the previous week. Natural gas prices closed lower last week even though there is evidence of a tightening of natural gas stocks. For the last week natural gas at NYMEX settled at $3.113, down $0.047 or -1.49%. In other news, according to the U.S. Energy Information Administration, domestic supplies of natural gas rose by 51 billion cubic feet for the week-ended October 13. Traders were looking for build of 59 billion cubic feet. China's PPI rose 6.9% in September from a year earlier, beating market expectations to rise 6.3%, the same pace as in the previous month. CPI rose 1.6% YoY, in line with forecasts but easing from a gain of 1.8 percent in August. For the week ahead, investors will be watching the European Central Bank meeting for further details on plans to scale back its massive stimulus program. Markets will keep an eye on a preliminary reading of third-quarter U.S. growth to further assess the impact of recent hurricanes on economic activity and how it could affect the Federal Reserve s view on monetary policy. Week Ahead Buy : Zinc Weekly Report: Metals & Energy ( Oct 23 Oct 27, 2017) Zinc prices find strength as data showed on Monday that output in China slipped 2.7 percent last month to 537,000 tonnes, highlighting worries that winter production cuts are tightening supplies of metals. World's second-largest economy grew at 6.8 percent in the third quarter and remained on track to post the first full-year pickup in seven years. 1

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

3 BULLION FUNDAMENTALS Precious Metals GOLD Gold prices fell on Friday, pressured lower by the stronger U.S. dollar which was boosted after President Donald Trump's plans to overhaul the tax code cleared a critical hurdle. Gold futures for December delivery settled down 0.59% at $1, on the COMEX division of the New York Mercantile Exchange. For the week, the precious metal was down 1.86%, which means it has fallen in five of the past six weeks. The dollar rose on Friday, making gold more expensive for holders of other currencies, after Senate Republicans approved a budget measure that will allow them to pursue tax cuts without support from the Democratic Party. The dollar index ended the week up 0.64%, its fifth weekly increase in six weeks. Investors expect a fiscal boost to push up inflation, adding pressure on the U.S. Federal Reserve to raise interest rates, known as the "Trumpflation" trade. Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced. Markets will keep an eye on a preliminary reading of third-quarter U.S. growth to further assess the impact of recent hurricanes on economic activity and how it could affect the Federal Reserve s view on monetary policy and thereby impacting gold prices. SILVER Spot Silver prices ended the week in negative territory, down 2.25% to settle the week at $16.98 an ounce. The silver market has given up most of its gains from the previous week, which saw prices push above $17.47 an ounce. December silver futures last traded on Friday at $17.06 an ounce. The white metal suffered from growing positive investor sentiment in the marketplace. The U.S. dollar saw renewed interest on Friday after the U.S. Senate vote to approve a budget plan for the 2018 fiscal year. The legislation also contains a reconciliation clause that would allow Republicans to push tax reform legislation through the Senate with a simple majority, instead of the traditionally required 60% majority. The U.S. dollar index, which measures the greenback s strength against a trade-weighted basket of six major currencies, was up 0.64% at Silver prices have an inverse relation with the dollar index and suffered losses as investors shift to dollar amid confidence in economy. The ishares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR), which are backed by physical silver bullion, are lower by nearly 2.13% over the past week. U.S. sales of American Eagle silver coins are both on track for their weakest year since 2007, as investors shrug off geopolitical concerns and sell some silver in favor of investing in the stock markets' record rally. 3

4 Precious Metals BULLION TECHNICALS GOLD Gold prices remained fragile where counter lost 1 percent last week on domestic bourses. Consolidation has gripped the metal after 2 month long rally that halted in September month. Moving ahead, prices may remain under pressure in coming week that could find support near 100 day EMA at Rs.29300/10gms levels. Furthermore, any sustained break below said level could knock down prices towards key support at Rs.29000/10gms. On the other hand, counter may face supply near Rs /10gms hurdle zone. On technical check, oscillators are showing negative breath and considering the structure, traders can opt for sell on rise strategy for next week. SILVER Bullish momentum in white metal remains capped as prices traded sideways in proximity of last week's high and low to close the week lower 522 points or 1.29% at Rs / Kg on MCX. Silver Spot on COMEX division settled week at $16.98 / Oz. On weekly charts uptrend is intact as prices trade above EMA 20 with strength. On daily charts, prices retraced to 50% Fibonacci level of recent swing pivots at Rs.39670/Kg ($16.88/Oz on COMEX ) and are held intact.silver is ready to resume its original uptrend building biasness for week forward as bullish. Traders are advised to build long position close to support zone of Rs /Kg($16.75/Oz on COMEX ) for upside targets of Rs.40240/Kg keeping stops below Rs.39100/Kg. 4

5 Base Metals BASE METALS OVERVIEW FUNDAMENTALS London copper nudged higher on Friday as some investors beefed up positions following overnight losses, and posted its fourth weekly rise even after retreating from three-year highs. Copper at the start of the week rallied above $7,000 a tonne for the first time since September Traders said the slight pullback in price overnight was in reaction to Thursday s data showing economic growth in China, the world s biggest metals consumer, was in line was expectations. While some interpreted the data as supportive of Chinese industrial activity, ANZ Bank noted investors in the sector remained cautious. State-owned China metals firm Jiangxi Copper Co Ltd plans to make an acquisition in mineral-rich Africa, president and chairman Long Ziping said, as the country s top integrated copper producer aims to step up overseas expansion. Hedge funds and money managers reduced their net long position in COMEX copper contracts to a five-week high in the week to Oct. 17, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday. China has been importing more of the metal, according to customs statistics. September saw 430,000 tons enter the county, up 10% from August and the highest level since March. Nickel prices rallied above the $12,000/t mark last week in LME amid reports of widening deficits. News that production at Brazil s Vale fell 4.3 percent year on year in the last quarter and dropping LME/Shanghai on warrant inventories, all of which led to a bout of short covering. Chinese environmental planned capacity cuts for some 400kt of nickel pig iron ("NPI") capacity during the winter months have sparked a round of short-covering associated with the recent rally in prices. The higher exchange price of nickel is pushing physical premiums higher too. Nickel briquettes cif China have followed the recent upsurge in nickel full plate premiums, driven by a free trade agreement between Australia and China as well as stronger briquettes demand from the battery sector. Copper Technicals Copper posted gains for fifth consecutive week where prices settled with 1.70 percent positive returns. However, counter gave up early gains as prices came under profit booking. Though, it could be seen as warning signal but still does not confirm the reversal of the trend. One could find Rs.448/kg level as key trigger for the momentum run and a break below the same would allow bears to hold the grip. As of now, prices are trading above its monthly average and trend is still intact on the higher side where prices could find Rs.467/kg levels as major supply zone for the coming week. As a trade, one can buy copper near Rs.452/kg levels for target price of Rs.465/kg mark with stop loss of Rs.447/kg level. Nickel Technicals Nickel prices pared nearly all its gains but settled marginally higher for last week. Bulls felt tension on higher levels and prices rolled down after marking double top with recent swing high at angel number Rs.786/kg mark. While looking at recent price action, it could be sensed that supply is being strong on higher side and traders are interested in unwinding their long trades with rising prices. For coming week, prices would like to respect Rs.786kg level as major trigger for further upside whereas Rs.745/kg level would be the lower base for prices. For trading perspective, one can look for some rise near Rs.770/kg levels to initiate short trade for target price of Rs. 748/kg mark with stop loss of Rs.788/kg level as stop loss. 5

6 Base Metals BASE METALS OVERVIEW FUNDAMENTALS Zinc hit a 10-year price peak of $3, a ton on the London market this month but last week it touched a low of $3,040 at LME. For the last week it has registered a weekly loss of around 4.5 per cent. Data released on Monday confirmed that output in China slipped 2.7 percent last month to 537,000 tonnes, highlighting worries that winter production cuts are tightening supplies of metals. World's second-largest economy grew at 6.8 percent in the third quarter and remained on track to post the first full-year pickup in seven years. The head of the state planning agency said on Saturday that China's economy is on track to meet its official growth target for 2017 despite a punishing war on pollution. Zinc time-spreads have also loosened up a lot over the past day or so as onwarrant stocks rebuild. Cash-to-threes, for instance, was valued at a backwardation of just $24.75 at Tuesday s close. Aluminium prices closed flat last week, finding support from the news that China s capacity cuts are beginning to take effect. China's aluminium output fell a third straight month in September, official data showed on Thursday, although it remains on track to hit a record high in 2017 despite capacity cuts. The world's top aluminium producing country churned out 2.61 million tonnes of the metal last month, down 1.1 percent from 2.64 million tonnes in August and 5.6 percent from million tonnes in September 2016, according to the National Bureau of Statistics (NBS). Year-to-date aluminium production still came in at million tonnes, up 5 percent year-on-year, the NBS said. Lead dropped sharply as ILZSG reported that the global lead market narrowed its output deficit to 4,600 tonnes in August from 31,900 tonnes in July. For January to August, the lead market had an output deficit of 119,000 tonnes compared with a surplus of 49,000 tonnes in the same period last year. China's PPI rose 6.9% in September from a year earlier, beating market expectations to rise 6.3%, the same pace as in the previous month. CPI rose 1.6% YoY, in line with forecasts but easing from a gain of 1.8 percent in August. Zinc Technicals Zinc prices turned bearish as counter lost 3.50 percent at the end of the week. Traders locked their gains on higher levels that left metals with no buying hands which resulted in sharp fall. Going forward, prices have found trend line support on daily chart, embraced with 50 day EMA and bounced thereafter as a signal of buyers attention. Level wise, counter has immediate support at Rs.202/kg levels with major support at Rs.199/kg levels. On the other hand, a recovery could be expected towards Rs.212/kg mark on the higher side. Also, daily RSI indicator is inching higher after retracing back near 30 levels that supports the mentioned view. As a strategy, traders can buy zinc near Rs.202/kg levels for target price of Rs.211/kg levels while considering stop loss below Rs.199/kg levels. Aluminium Technicals Last week, prices portrayed a long legged doji that suggest indecision among traders for future course of action. This adds further skepticism as prices are trading in a sideways direction for last four weeks. The strong upside momentum has paused after hitting Rs /kg top last month and bears have marked their territory at this point as strong resistance. Short term moving averages are flat in nature that shows sluggish move to continue in absence of any trigger. Considering the sentiments, it is appropriate to find trades with in the established trading range (Rs /kg-Rs.136/kg). Hence, it is advisable to sell aluminium near Rs.140/kg levels for target price of Rs.137/kg levels with stop loss above Rs /kg levels. Lead Technicals Bears thrashed the heavy metal amid profit booking to close the week lower 3.6 points or 2.2 % at Rs / Kg, its highest weekly loss after four week rally. Decline on weekly charts initiated last week as prices approached its alltime high resistance level marked on Nov 28 and formed two consecutive inverted hammer candlestick pattern at key resistance zone. Pattern confirmed that buyers are now exhausted and no longer interested to take price higher.on daily charts price formed a lower high and successfully completed 123 breakout pattern after it broke Rs.162/Kg mark. Early birds have already stepped in and ready to drive prices south, dictating biasness as bearish. Traders are advised to build short positions close to EMA 20 at Rs /Kg mark for downside targets of Rs.155/Kg keeping stop above Rs.164 /Kg. 6

7 Energy ENERGY FUNDAMENTALS CRUDE OIL US WTI crude oil prices settled higher in see-saw trade on Friday, as political tensions in the Kurdistan region continued to disrupt crude supplies. For the week, WTI prices rose about 0.8%, the second-straight weekly gain. Oil exports from Iraq's Kurdistan towards the Turkish port of Ceyhan were flowing at average rates of 216,000 barrels per day versus the usual flows of 600,000 bpd, a shipping source said. The supply disruption in Iraq comes amid ongoing political uncertainty in the region following conflict between Iraqi and Kurdish forces. Iraqi troops marched toward Northern Iraq earlier in week and regained control of two major oilfields from Kurdish forces. Meanwhile, in the U.S., investors mulled over data showing oil drilling activity fell for a third week in a row, extending a two-month drilling decline. Oilfield services firm Baker Hughes said Friday that its weekly count of oil rigs operating in the United States fell by seven to 736, the lowest level since June. The weekly rig count is an important barometer for the drilling industry and serves as a proxy for domestic oil production. U.S. commercial crude oil inventories decreased by 5.7 million barrels from the previous week. In a speech Thursday, Mohammad Barkindo, secretary-general at the Organization of the Petroleum Exporting Countries, said that the oil market is balancing at an accelerated pace, and demand will continue to rapidly grow in coming decades. Despite the bullish signals, analysts warned that OPEC needs to extend its agreement to reduce oil output beyond its current March 2018 expiry date in order to rebalance the market. The original deal, struck nearly a year ago between OPEC and 10 other non-opec countries led by Russia, was to cut production by 1.8 million barrels a day for six months. The agreement was extended in May of this year for a period of nine months until March 2018 in a bid to reduce global oil inventories and support oil prices. The cartel's next meeting is set for November 30 in Vienna. NATURAL GAS Natural gas prices closed lower last week even though there is evidence of a tightening of natural gas stocks. For the last week natural gas at NYMEX settled at $3.113, down $0.047 or -1.49%. In other news, according to the U.S. Energy Information Administration, domestic supplies of natural gas rose by 51 billion cubic feet for the week-ended October 13. Traders were looking for build of 59 billion cubic feet. Total stocks now stand at trillion cubic feet, down 179 billion cubic feet from a year ago, and 35 billion cubic feet below the five-year average, the government said. Working stocks have tightened significantly since the middle of March, when they stood almost 400 bcf above the average and the market appeared heavily oversupplied. But since the injection season started at the beginning of April, stocks have risen by less than average in 19 out of 28 weeks, increasing by a total of 1,594 bcf compared with an average of 1,891 bcf. The result is that the surplus has been steadily worked off and the market has now moved into a small deficit compared with the five-year average. 7

8 Energy ENERGY TECHNICALS CRUDE OIL Bulls managed to protect themselves as bears tried hard to push prices lower and closed the week positive 62 points or 1.87 % at Rs.3372 / bbl on MCX.WTI crude futures at NYMEX closed at $51.94 / bbl. On weekly charts, price is trading in a clear uptrend with higher highs and higher lows. This week marked a bullish candlestick with a tail on top pattern as price closed midway confirming both buyers and sellers were equally active and price could not lead anywhere. The indecision was obvious as prior trend was up but price traded close to key resistance zone of Rs /bbl on MCX ($52.50on NYMEX). Bears failed twice in attempt to take prices lower as prices were capped below by 20 EMA confirming that the initial uptrend is still intact. Biasness of week ahead remains bullish.traders can build long positions close to Support of EMA 20 at Rs.3350/bbl ($51.40/bbl on NYMEX ) for upside targets of Rs.3450/ bbl and Rs.3500/bbl keeping stops below Rs.3300/bbl. NATURAL GAS Sellers fully dominated over gas prices and burnt it to weekly low down 5%. However;, profit booking on Friday, closed the week midway down 5.2 points or 2.66 % at Rs.190/mmbtu mark on MCX.Natural gas futures on NYMEX closed at $2.913 / mmbtu. Downtrend is intact as price forms lower high lower low pattern on daily charts. Momentum is however sluggish as visible from overlapping candles on weekly charts as price trades within last week s high and low. Prices is trading sideways in a downward trending channel and have been nicely rejected from the bearish trend line twice as well as sustaining below it,confirming biasness for week ahead as bearish.traders are advised to take advantage of downtrend and profit by building short positions on pullbacks to trend line at Rs /mmbtu mark ($3.015 /mmbtu on NYMEX ) for downside targets of Rs.185 / mmbtu keeping stops above Rs / mmbtu level 8

9 Date Time Name For Consensus Previous Importance 24-Oct 19:15 Manufacturing PMI Oct Very High 24-Oct 19:15 Services PMI Oct Very high 24-Oct 19:15 Markit Composite PMI Oct Very High 25-Oct 18:00 Core Durable Goods Orders Sep % 0.5% Very High US Economic Calendar 25-Oct 18:00 Durable Goods Orders Sep % 2.0% Very High 25-Oct 18:30 Housing Price Index Aug % 0.2% High 25-Oct 19:30 New Home Sales Sep K 560K Very High Oct 23 Oct 27, Oct 20:00 EIA Weekly Crude Oil Stocks Change w/o 20 Oct Mbpd Very High 26-Oct 18:00 Initial Jobless Claims w/o 21 Oct 235K 222K Very High 26-Oct 18:00 Good Trade Balance Sep. 17 $ B $62.94 B Very High 26-Oct 18:00 Wholesale Inventories Oct % 0.9% High 26-Oct 19:30 Pending Home Sales Sep % -2.6% Very High 26-Oct 20:00 EIA Natural Gas Oil Stocks Change w/o 20 Oct - 51 Bcf Very High 27-Oct 18:00 GDP Q % 3.1% Very High 27-Oct 19:30 Michigan Consumer Expectations Oct High 27-Oct 19:30 Michigan Consumer Sentiment Oct High 27-Oct 22:30 Baker Hughes Oil Rig Count w/o 20 Oct Very High 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