Zinc glistens with promise

               Zinc prices have risen sharply in the last few months. Since March, spot prices of the metal on the LME have rallied 21 per cent. The metal now trades at $2,392 a tonne The market for zinc had run into deficit in 2013 after being in surplus for six consecutive years. According to data from the International Lead and Zinc Study Group (ILZSG), there was a deficit of 91,000 tonnes in the metal in 2013. This deficit has already widened to 1,07,000 tonnes between January and April this year.

The domestic zinc futures contract, which moves in tandem with LME zinc, is also up about 21 per cent since March this year. The uptrend in MCX Zinc is likely to continue. Investors can consider buying the contract and holding it for gains in the medium term.

Supply constraints

The supply deficit was due to drawdown in mine production. Mine output, which increased 3.8 per cent in 2012, rose by just 0.5 per cent in 2013.

Canada’s two major mines, Brunswick and Perseverance, had shut their operations last year. Together they contributed nearly 3 per cent to the global mine production in 2012.

Supply constraints in the zinc market may remain for some more time to come. Australia’s Century mine, the world’s second largest zinc mine, is expected to close its operations by 2016. Although there have been reports of new mines coming up in the next one-two years, they may not make up for the loss of closed mines, say market experts.

However, while supply will be tight, various projections indicate that demand for zinc will only increase in the coming years. ILZSG forecasts refined zinc consumption to go up over 4 per cent to 13.58 million tonnes this year. With global zinc production (from mines) to increase by only 2.8 per cent to 13.57 million tonnes, a deficit of 1,17,000 tonnes is anticipated.

Lower production and increasing demand could aid further rise in zinc price in the coming months.

Outlook

For the medium term, the outlook is bullish for the MCX Zinc (₹144 a kg) futures contract. The price action from August 2013 to June 2014 shows formation of a triangle. The contract has witnessed a bullish breakout of this triangle pattern this month and also breached a key resistance at ₹139 last week.

Though currently it is in another resistance zone, the downside could be limited if a pullback is seen from this level. A rally to ₹160, the target level of the triangle pattern, looks likely in the medium term. Supports for the contract are at ₹139, ₹134 and ₹129.

Traders with a medium-term perspective can consider taking long positions in MCX Zinc futures contract. If the contract reverses lower from ₹145, accumulate more long positions near ₹139 and ₹135. The contract’s price chart says that the downside will be limited to ₹134. An immediate decline below this level looks less probable at the moment. Stop-loss can be kept at ₹128 for the target of ₹160.

The medium-term outlook will turn negative only if the contract records a strong close below ₹129.

The ensuing target on such a break will be ₹123 and ₹110 — the 55- and 200-week moving average support levels, respectively.

For the short term, the MCX Zinc futures contract has a significant resistance near the current levels at ₹145. Since the contract has risen sharply in a short span of time, there is a high probability for this resistance to trigger a short-term correction in the contract. A reversal from ₹145 can pull the contract lower to ₹139 initially and then to ₹137 — the 21-day moving average.

A further break below this level can drag the contract to ₹134 in the short term. On the other hand, if the contract manages to surpass this hurdle at ₹145, it can extend the current rally to ₹149. The next key short-term resistance for the contract is at ₹149.5 which is the 61.8 per cent Fibonacci retracement level. - thehindubusinessline.com

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Asia Stocks Rise as H Shares Head for Bull; Soybeans Gain

                          Asian stocks rose, with a gauge of Chinese shares in Hong Kong heading toward a bull market, while Treasuries and oil slipped as investors await data on U.S. services before the Federal Reserve meets this week. Soybeans and corn rallied.

The MSCI Asia Pacific Index (MXAP) added 0.3 percent by 12:33 p.m. in Tokyo, following last week’s 1.4 percent advance. The Hang SengChina Enterprises Index climbed to 11,105.70, more than 20 percent above a March 20 closing low, while trading volume in Shanghai surged. Standard & Poor’s 500 Index futures lost 0.1 percent and the yield on 10-year U.S. notes climbed one basis point after the equity benchmark retreated from a record. Oil in New York and London dropped at least 0.4 percent. Soybean and corn futures jumped at least 0.9 percent.

U.S. reports on services activity and pending home sales are due before the Fed meets to discuss monetary policy, while Goldman Sachs Group Inc. said last week rising yields may spur a retreat in global stocks and bonds over the next three months. Chinese industrial-company profits jumped the most last month since September, data yesterday showed. Israel resumed its offensive against Hamas militants in the Gaza Stripafter a lull in fighting, while the U.S. said it has photos of Russia shelling into Ukraine.

“Sentiment has turned in favor of growth and cheap valuations in the Chinese market,” said Khiem Do, who helps oversee about $60 billion as the Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management Ltd. The shares have “been lagging for a long time so they’re catching up with world markets. The Fed has communicated to the market that the first Fed-fund rate hike will be more like next year than this year, so should they change their mind then that would be quite negative.”

Asian Valuations

The Hang Seng China Enterprises Index climbed 1 percent today, after it jumped 5.3 percent last week, the most since March. The Hang Seng Index advanced 1 percent while the Shanghai (SHCOMP) Composite Index surged 2.1 percent, with the number of transactions about 170 percent above the 30-day average for the time of day.

The gauge of Chinese shares in Hong Kong trades at 7.7 times estimated earnings, compared with 13.6 times for MSCI’s Asia-Pacific measure. The S&P 500 is at 16.6 times.

Profits at industrial companies in Asia’s largest economy increased by 17.9 percent in June from a year earlier, after gaining 8.9 percent in May, data from China’s statistics bureau yesterday showed. It was the biggest gain since an 18.4 percent climb in September of last year and came after a private gauge of Chinese manufacturing advanced to an 18-month high, data last week showed.

Price Gap

The Hang Seng China AH Premium Index climbed 1.7 percent to 91.65, signaling a narrowing gap between the Hong Kong and mainland share prices of companies with dual listings. A link between the Shanghai and Hong Kong bourses will start from Oct. 13, the National Business Daily said, citing an unidentified brokerage.

The S&P/ASX 200 Index (AS51) was little changed in Sydney, while South Korea’s Kospi index climbed 0.6 percent. Markets in Indonesia, Malaysia and Singapore are closed for holidays.

Goldman Sachs cut its rating on stocks to neutral, the equivalent of hold, for the next three months, according to a quarterly research report from its portfolio strategy group July 25. The bank also lowered corporate credit to underweight and predicted U.S. government bond yields will increase.

U.S. Notes

Amazon.com Inc. drove U.S. stock declines July 25, sliding almost 10 percent after reporting the widest loss since 2012, distracting investors from an earnings season where 79 percent of S&P 500 members have exceeded analysts’ profit estimates. The benchmark U.S. equity gauge fell 0.5 percent to 1,978.34 July 25, declining for the first time in four days.

Yields on 10-year Treasuries climbed to 2.48 percent after slipping four basis points July 25. Australian bonds due in a decade paid 3.42 percent, after rates rose six basis points, or 0.06 percentage point, last week.

The gap between rates on 30-year Treasury notes and five-year debt narrowed to the least since 2009 last week as uncertainty over whether the U.S. economic recovery is on a strong footing vied with concern that the Fed may raise rates earlier than previously anticipated.

The Treasury will auction $29 billion in two-year securities today, $35 billion in five-year debt tomorrow and $29 billion in seven-year bonds July 30. It will also sell $15 billion in two-year floating-rate notes July 30.

Employers probably added 231,000 workers to nonfarm payrolls in July, after a 288,000 increase in June, according to 69 economists’ estimates compiled by Bloomberg before Aug. 1 reports.

Copper, Lead

The Markit Economics composite and service industries purchasing managers’ indexes for the U.S. are due today, along with data on pending home sales. An update on second-quarter gross domestic product is scheduled for July 30, with the FOMC meeting July 29-30.

Copper for delivery in three months on the London Metal Exchange fell as much as 0.5 percent to $7,090 a ton. Freeport-McMoRan Inc. said July 25 that it will resume full operations in Indonesia at its Grasberg copper operation, the world’s third-largest, and plans to restart exports next month after resolving a dispute with the government.

Lead on the LME rose as much as 0.8 percent to $2,284 a ton, heading for the highest close this year. The metal gained 3.7 percent last week, the biggest advance since January. Aluminum was up 0.7 percent to $2,010.50 a ton. - Bloomberg

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Asia Stocks Rise as H Shares Head for Bull; Soybeans Gain

                      Asian stocks rose, with a gauge of Chinese shares in Hong Kong heading toward a bull market, while Treasuries and oil slipped as investors await data on U.S. services before the Federal Reserve meets this week. Soybeans and corn rallied.

The MSCI Asia Pacific Index (MXAP) added 0.3 percent by 12:33 p.m. in Tokyo, following last week’s 1.4 percent advance. The Hang SengChina Enterprises Index climbed to 11,105.70, more than 20 percent above a March 20 closing low, while trading volume in Shanghai surged. Standard & Poor’s 500 Index futures lost 0.1 percent and the yield on 10-year U.S. notes climbed one basis point after the equity benchmark retreated from a record. Oil in New York and London dropped at least 0.4 percent. Soybean and corn futures jumped at least 0.9 percent.

U.S. reports on services activity and pending home sales are due before the Fed meets to discuss monetary policy, while Goldman Sachs Group Inc. said last week rising yields may spur a retreat in global stocks and bonds over the next three months. Chinese industrial-company profits jumped the most last month since September, data yesterday showed. Israel resumed its offensive against Hamas militants in the Gaza Stripafter a lull in fighting, while the U.S. said it has photos of Russia shelling into Ukraine.

“Sentiment has turned in favor of growth and cheap valuations in the Chinese market,” said Khiem Do, who helps oversee about $60 billion as the Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management Ltd. The shares have “been lagging for a long time so they’re catching up with world markets. The Fed has communicated to the market that the first Fed-fund rate hike will be more like next year than this year, so should they change their mind then that would be quite negative.”

Asian Valuations

The Hang Seng China Enterprises Index climbed 1 percent today, after it jumped 5.3 percent last week, the most since March. The Hang Seng Index advanced 1 percent while the Shanghai (SHCOMP) Composite Index surged 2.1 percent, with the number of transactions about 170 percent above the 30-day average for the time of day.

The gauge of Chinese shares in Hong Kong trades at 7.7 times estimated earnings, compared with 13.6 times for MSCI’s Asia-Pacific measure. The S&P 500 is at 16.6 times.

Profits at industrial companies in Asia’s largest economy increased by 17.9 percent in June from a year earlier, after gaining 8.9 percent in May, data from China’s statistics bureau yesterday showed. It was the biggest gain since an 18.4 percent climb in September of last year and came after a private gauge of Chinese manufacturing advanced to an 18-month high, data last week showed.

Price Gap

The Hang Seng China AH Premium Index climbed 1.7 percent to 91.65, signaling a narrowing gap between the Hong Kong and mainland share prices of companies with dual listings. A link between the Shanghai and Hong Kong bourses will start from Oct. 13, the National Business Daily said, citing an unidentified brokerage.

The S&P/ASX 200 Index (AS51) was little changed in Sydney, while South Korea’s Kospi index climbed 0.6 percent. Markets in Indonesia, Malaysia and Singapore are closed for holidays.

Goldman Sachs cut its rating on stocks to neutral, the equivalent of hold, for the next three months, according to a quarterly research report from its portfolio strategy group July 25. The bank also lowered corporate credit to underweight and predicted U.S. government bond yields will increase.

U.S. Notes

Amazon.com Inc. drove U.S. stock declines July 25, sliding almost 10 percent after reporting the widest loss since 2012, distracting investors from an earnings season where 79 percent of S&P 500 members have exceeded analysts’ profit estimates. The benchmark U.S. equity gauge fell 0.5 percent to 1,978.34 July 25, declining for the first time in four days.

Yields on 10-year Treasuries climbed to 2.48 percent after slipping four basis points July 25. Australian bonds due in a decade paid 3.42 percent, after rates rose six basis points, or 0.06 percentage point, last week.

The gap between rates on 30-year Treasury notes and five-year debt narrowed to the least since 2009 last week as uncertainty over whether the U.S. economic recovery is on a strong footing vied with concern that the Fed may raise rates earlier than previously anticipated.

The Treasury will auction $29 billion in two-year securities today, $35 billion in five-year debt tomorrow and $29 billion in seven-year bonds July 30. It will also sell $15 billion in two-year floating-rate notes July 30.

Employers probably added 231,000 workers to nonfarm payrolls in July, after a 288,000 increase in June, according to 69 economists’ estimates compiled by Bloomberg before Aug. 1 reports.

Copper, Lead

The Markit Economics composite and service industries purchasing managers’ indexes for the U.S. are due today, along with data on pending home sales. An update on second-quarter gross domestic product is scheduled for July 30, with the FOMC meeting July 29-30.

Copper for delivery in three months on the London Metal Exchange fell as much as 0.5 percent to $7,090 a ton. Freeport-McMoRan Inc. said July 25 that it will resume full operations in Indonesia at its Grasberg copper operation, the world’s third-largest, and plans to restart exports next month after resolving a dispute with the government.

Lead on the LME rose as much as 0.8 percent to $2,284 a ton, heading for the highest close this year. The metal gained 3.7 percent last week, the biggest advance since January. Aluminum was up 0.7 percent to $2,010.50 a ton. - Bloomberg

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Copper Holds Losses as Freeport Set to Resume Indonesia Exports

                   Copper dropped for a second day after Freeport-McMoRan Inc. received approval from Indonesia to resume exports from its Grasberg mine.

The metal for delivery in three months fell as much as 0.5 percent to $7,090 a metric ton on the London Metal Exchange and traded at $7,123 at 10:36 a.m. in Hong Kong. Copper has lost 3.2 percent since the start of the year.

Freeport plans to resume copper concentrate exports from Indonesia in August, the company said in a statement Friday. The company had reduced operations by about half at the Grasberg mine, the third largest in the world, after the government introduced restrictions in January to encourage local raw-material processing.

“The exports of concentrates will now be priced in and that’s why prices are down,” Tetsu Emori, a fund manager at Astmax Asset Management Inc., said by phone from Tokyo. “We don’t know yet how much of an impact it will have on actual production on metals.”

Copper futures for September in New York was little changed to $3.242 a pound, while the contract for the same month in Shanghai dropped 0.5 percent to 50,570 yuan ($8,173) a ton.

On the LME, aluminum, zinc and lead climbed, while nickel fell. Tin hadn’t traded.

Tin shipments from Indonesia, the largest exporter, are set to contract the most in seven months in July, Agung Nugroho, corporate secretary at PT Timah, said July 23.

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Gold Price Start The Week Higher But Analysts See Volatility On Horizon

                    Gold prices are starting the week on a positive note but analysts are expecting prices to remain volatile with significant economic events looming on the horizon.

Comex August gold opened the Sunday North American evening/Monday Asian session at $1,307.60 an ounce, up from Friday’s pit close of $1,303.30 an ounce. As of 8:45p.m. EDT, August gold was trading at $1,305.30 an ounce, relatively unchanged from Friday’s close.

Electronic trading of Comex September silver futures opened Sunday evening/Monday morning at $20.715 an ounce, slightly up from Friday’s pit close of $20.636 an ounce; as of 8:15 p.m. EDT, September silver was at $20.740 an ounce.

Although gold prices are back above $1,300 after hitting a four-week low earlier last week, analysts at HSBC said they are expecting to see choppy markets during the week, with the scheduled FOMC and U.S. jobs numbers out on Friday. 

“Gold price volatility is likely to pick-up next week with the Federal Open Market Committee meeting on 29-30 July and the July nonfarm payrolls data to be released on 1 August,” the analysts said in a report published late Friday.

Edward Meir, commodities consultant with INTL FCStone said in a research note published Sunday afternoon that gold could find some support early in the week as markets react to continued turmoil in the Middle East and Eastern Europe. He also said that a potential default by Argentina, which could come by Thursday, should keep investors on edge and boost gold demand.

However, he added strong economic data later in the week could help create some positive investor sentiment, which would be good for equity markets and bad for gold prices.

Analysts at ANZ Bank are expecting gold to struggle as geopolitical events have started to lose their impact on the gold market.

“We don't expect the latest Middle East tension to be a significant driver of prices over an extended period,” they said in their report published Sunday evening.

Physical demand, which has helped support gold prices in the last appears to be losing some momentum, Meir also noted in his report.

“In the physical markets, there was an outflow of 3.6 tons from the SPDR Gold Trust as of last Thursday,” he said. “China’s net overseas purchases of gold through Hong Kong fell to a 17-month low in June, sliding to 40.54 tons, from 52.60 tons in May and 104.6 tons in the year-ago period.” - kitco.com

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Natural gas futures - weekly outlook: July 28 - August 1

            

                    U.S. natural gas futures ended Friday’s session close to an eight-month low, as demand for the fuel was likely to remain limited after meteorologists predicted mild summer weather in much of the U.S.

On the New York Mercantile Exchange, natural gas for delivery in August tumbled 1.72%, or 6.6 cents, on Friday to settle at $3.781 per million British thermal units by close of trade.

Natural gas futures fell to $3.744 on Thursday, the lowest since November 26.

On the week, Nymex natural gas prices lost 4.3%, or 17.0 cents, the sixth consecutive weekly decline.

Futures were likely to find support at $3.741 per million British thermal units, the low from November 26 and resistance at $3.886, the high from July 24.

Natural gas prices have been under heavy selling pressure in recent sessions after updated weather-forecasting models called for cooler temperatures across most parts of the heavily-populated Midwest and Northeast regions over the next ten days.

Demand for natural gas tends to fluctuate in the summer based on hot weather and air conditioning use.

Prices rallied more than 2% on Thursday after the U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. rose by 90 billion cubic feet, below expectations for an increase of 96 billion cubic feet.

The five-year average change for the week is an increase of 46 billion cubic feet.

Total U.S. natural gas storage stood at 2.219 trillion cubic feet as of last week, narrowing the deficit to the five-year average to 23.5%, down from a record 54.7% at the end of March.

Data from the Commodities Futures Trading Commission released Friday showed that hedge funds and money managers decreased their bullish bets in natural gas futures in the week ending July 22.

Net longs totaled 27,748 contracts, down 26.2% from net longs of 37,617 in the previous week.

Elsewhere on the Nymex, crude oil for September delivery settled at $102.09 a barrel by close of trade on Friday, up 0.13%, or 14 cents, on the week.

Meanwhile, heating oil for August delivery advanced 2.19% on the week to settle at $2.912 per gallon by close of trade Friday. - investing.com

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Crude oil futures - weekly outlook: July 28 - August 1

           

                     Brent oil futures rallied to a one-week high on Friday, as investors continued to assess the geopolitical situation in Eastern Europe and in the Middle East.

On the ICE Futures Exchange in London, Brent oil for September delivery rose to a daily high of $108.46 a barrel on Friday, the most since July 18, before settling at $108.39 by close of trade, up 1.23%, or $1.32.

The September Brent contract advanced 1.06%, or $1.15, on the week, the second consecutive weekly gain.

Investors continued to closely watch an intensifying geopolitical crisis between Moscow and the West over the situation in Ukraine.

The Pentagon said Friday that Russia has escalated the violence in Ukraine and may be set to provide more sophisticated weapons to pro-Russian rebels in eastern Ukraine.

Russia is one of the world's top producers and exporters of oil and gas.

Meanwhile, fighting between Israel and Hamas showed little sign of abating, despite ongoing efforts by the U.S. to reach a ceasefire.

Market participants are worried that a flare up in the conflict could draw in neighboring countries and affect oil supplies.

Elsewhere, on the New York Mercantile Exchange, crude oil for delivery in September fell to a session low of $101.00 a barrel on Friday, the weakest since July 17, before coming off the lows to settle at $102.09, up 0.02%, or 2 cents.

U.S. oil prices were weighed by weekly supply data which showed that total motor gasoline inventories increased by 3.4 million barrels last week, above forecasts for a gain of 1.3 million barrels.

The larger than expected increase in gasoline stocks during the summer driving season in the U.S. was bearish for oil prices.

For the week, Nymex oil futures eased up 0.13%, or 14 cents, the second straight weekly gain.

Data from the Commodities Futures Trading Commission released Friday showed that hedge funds and money managers increased their bullish bets in New York-traded oil futures in the week ending July 22.

Net longs totaled 278,116 contracts as of last week, up 6.8% from net longs of 259,259 in the preceding week.

Meanwhile the spread between the Brent and the WTI crude contracts stood at $6.30 a barrel by close of trade on Friday, compared to $5.29 in the preceding week.

In the week ahead, investors will be focusing on Wednesday’s preliminary reading on U.S. second quarter growth, while Friday’s nonfarm payrolls report will also be in focus.

Wednesday’s Fed statement will also be closely watched for any indications that the central bank is moving closer to raising rates.

The Commerce Department on Friday reported a rise of 0.7% in orders of long lasting goods such as machinery and electronic products, compared to forecasts of 0.5%.

The data came a day after the U.S. Department of Labor said that the number of individuals filing for initial jobless benefits in the week ending July 19 declined by 19,000 to hit an eight-year low of 284,000. - investing.com

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Gold / Silver / Copper futures - weekly outlook: July 28 - August 1

                          Gold futures rallied 1% on Friday, as investors continued to monitor geopolitical concerns in the Gaza strip and Ukraine.

On the Comex division of the New York Mercantile Exchange, goldfor August delivery jumped 0.97%, or $12.50, on Friday to end the week at $1,303.30 a troy ounce.

Gold prices were likely to find support at $1,287.50, the low from July 24 and resistance at $1,316.80, the high from July 22.

Gold’s safe haven appeal was boosted on Friday as investors continued to closely watch an intensifying geopolitical crisis between Moscow and the West over the situation in Ukraine.

The Pentagon said Friday that Russia has escalated the violence in Ukraine and may be set to provide more sophisticated weapons to pro-Russian rebels in eastern Ukraine.

Meanwhile, fighting between Israel and Hamas showed little sign of abating, despite ongoing efforts by the U.S. to reach a ceasefire.

Gold is often seen as a haven investment in times of geopolitical uncertainty.

Despite Friday’s strong gains, Comex gold prices declined 0.46%, or $6.10 an ounce, on the week, the second consecutive weekly loss.

Gold tumbled to a five-week low of $1,287.50 on Thursday after upbeat U.S. economic data added to speculation that the Federal Reserve will hike interest rates sooner than expected.

The U.S. Department of Labor reported that the number of individuals filing for initial jobless benefits in the week ending July 19 declined by 19,000 to hit an eight-year low of 284,000.

On Friday, the Census Bureau said that U.S. durable goods orders rose 0.7% in June, beating expectations for a 0.5% gain. Core durable goods orders, which are stripped of transportation items, grew 0.8% in June, beating expectations for a 0.6% gain.

The data primed market expectations for the Fed to wind down its bond-buying stimulus program around October and raise interest rates in 2015, which would reduce the need for gold for use as a hedge against loose monetary policy.

In the week ahead, investors will be looking ahead to Wednesday’s monetary policy announcement by the Federal Reserve. The U.S. will also release the monthly non-farm payrolls report for July later in the week as well as a preliminary estimate on second quarter economic growth.

Data from the Commodities Futures Trading Commission released Friday showed that hedge funds and money managers increased their bullish bets in gold futures in the week ending July 22.

Net longs totaled 136,120 contracts, up 3.1% from net longs of 131,971 in the preceding week.

Also on the Comex, silver for September delivery climbed 1.08%, or 22.1 cents, on Friday to settle the week at $20.63 a troy ounce, as investors returned to the market to seek cheap valuations after prices dropped to a five-week low on Thursday.

On the week, the September silver futures contract lost 1.19%, or 25.0 cents, the second straight weekly decline.

Data from the CFTC showed that net silver longs totaled 46,221 contracts as of last week, down slightly from net longs of 46,795 contracts in the preceding week.

Elsewhere in metals trading, copper for September delivery rallied to a daily high of $3.279 a pound on Friday, the most since July 13, before turning lower to end at $3.240 by close of trade, down 0.8%, or 2.6 cents.

On the week, Comex copper prices rose 1.72%, or 5.6 cents a pound as growing optimism over the health of the U.S. economy and speculation demand from top consumer China will increase in the near-term boosted prices.

According to the CFTC, net copper longs totaled 44,107 contracts as of last week, down from net longs of 48,994 contracts in the preceding week. -investing.com

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