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Weekly Commodity: An average week for the commodity market

SMC | 10 Jan, 2017  | Follow Author | Add to my Favourites 
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Weekly Commentary


It was an average week for the commodity market. Counters such as bullion, oil seeds and base metals performed well whereas energy and other counter traded with dovish sentiments. Upside in commodities was due to some improvement in economic data amid fall in the dollar index. Base metals performed well on a positive announcement from China. China plans to add 2,100 km (746 miles) of track to its railway network this year and this has bolstered demand expectations. Beijing announced plans to spend 800 billion yuan ($115.1 billion) to build extra track and electrify 4,000 km of railroad. Meanwhile copper looks positive due to falling stocks in LME approved warehouses, which are at 305,875 tonnes down 11.5% since Dec. 16. Gold touched its highest in four weeks as the U.S. dollar stepped further away from a 14-year peak hit earlier this week, and on a technical rebound. Physical demand from China and India is quite strong at the moment. Uncertainties, such as Donald Trump's first few months as President of the US and upcoming elections in some European countries such as France and Germany, could boost gold prices as investors seek safe-havens. Silver too performed good on upside in both gold and base metals. Energy counter was weak, especially natural gas saw sharp downside. The prospect of a mild January has throttled the US natural gas market, underlining how a tightening commodity market remains vulnerable to the weather. The uses of natural gas include power generation, manufacturing and fertiliser, but demand typically peaks during the winter heating season.

In agri commodities, most of the oil seeds and edible oil saw rebound in the prices. It was only mustard seed, which saw bearish trade. Demand for mustard seed from crusher is hand to mouth on account of steady to weak demand for mustard by-products. Demand for mustard oil has declined at higher level in recent times as consumers are likely to shift to cheaper alternatives. Widening of positions by traders following pickup in demand from flour mills in the physical market amid pause in supply, kept wheat prices higher at futures trade. A weaker greenback is friendly for wheat prices because it makes U.S. crops less expensive for foreign importers at a time when U.S. farmers are relying on overseas buyers to soak up a portion of their recent huge harvest.

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About SMC
SMC Research, founded in 1990, is India’s leading share and stock broker, provides a wide range of financial services and investment solutions. A blend of extensive experience, diverse talent and client focus has made us the 4th largest broking house in India(Source: Dun and Bradstreet, 2008). Over the years, SMC has expanded its operations domestically as well as internationally. Existing network includes regional offices at Mumbai, Kolkata, Chennai, Cochin, Ahmedabad, Jaipur, Hyderabad, Bangalore plus a growing network of 2100+ offices spread across 425 cities/towns in India.

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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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