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Weekly Commodity: Magical upside was seen in base metals in the week gone by

SMC | 23 Aug, 2017  | Follow Author | Add to my Favourites 
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Weekly Commentary            


It was a week of big move in the commodity market. Magical upside was seen in base metals. However, the commodity index closed in red territory as upside in dollar index put pressure on the prices. Bullion counter prices were dragged down on upside in dollar index but here in India, it traded in a range with some appreciation due to weak Indian currency. $1300 is a tough resistance for gold in COMEX and stability above $17 is appearing little difficult for Silver. Base metals started 2017 on strong note, only to fade just as quickly from late February to early June. However, since then they have rallied and the Bloomberg Commodities Base Metals subindex is now up 12.8% year-to-date – to its highest level in over two years. The best performing base metals this year have been copper and aluminium, both up over 15% year-to-date, with zinc also up 12%. While the U.S. dollar move has contributed, it is also true that fundamentals for many metals have improved in the recent months. The aluminium industry, plagued by oversupply since a slump in demand after the global financial crisis almost a decade ago, has been reining in inventories. About 5 million metric tonnes of the 7 million tonnes of excess metal produced from 2008 to 2011 has now been consumed, according to researcher CRU Group. China's rising consumption of copper, as well as mine disruptions around the world, has prompted a surge in bullish bets by hedge funds. Base metals counter prices closed up in green territory.

Guar rally took rest and noticed profit booking from higher levels. Rajasthan has sown guar over 25 lakh hectares so far this year, up from 20.4 lakh hectare during the same period last year while Gujarat planted about 1.68 lakh hectares up from 1.17 lakh hectares till first week of August. There are reports of large scale damage to standing guar crop due to large excess rains in the major guar sowing districts of Western Rajasthan and Gujarat. It was a strong week for spices in which most of the spices saw good buying except turmeric. Edible oil prices dragged down whereas oil seeds saw revival in demand and positive impact was visible in futures trade. U.S. farmers are preparing to harvest their largest soybean crop on record this autumn, adding to the more than 10 million tonnes of soybeans remaining from the previous crop, the fifth largest end-of-season U.S. supply ever, according to the USDA. Global 2016-17 ending stocks are projected at a record-high 97 million tonnes.

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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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