Since The Fed policy-error'd in December, gold is now up 22% over US equities...
Gold tops $1200 for the first time since June 2015...
Tuesday, February 9, 2016
Monday, February 8, 2016
Lead soars as pressures ease
A sharp and continuous rally in lead prices, for the past three weeks, has wiped out the losses the metal made in the first two weeks of January. The spot price on the London Metal Exchange (LME) has surged 10 per cent from $1,600 to $1,771 per tonne.
On the domestic front, the lead futures contract traded on the Multi Commodity Exchange (MCX), which moves in tandem with the LME spot price, also rose 10 per cent over the same three-week period and closed on a stronger note at ₹120 per kg last week.
Two major factors have triggered the recent rally in lead. First is the recent weakness in the dollar which, in turn, has added sheen to assets like commodities and non-dollar currencies, in the last few weeks.
Two, recent data releases showing an increase in lead imports by China have also supported price rise for the metal. The country’s lead imports have increased about 45 per cent to 297 tonnes in December from the previous month according to data from Bloomberg.
Reports also suggest that an increase in the demand for batteries due to more battery failures this winter season has also helped prop up lead prices. Though the recent rally in lead can also be attributed to short-covering, the charts suggest that the recent uptrend can possibly extend.
Medium-term view
Barring the brief fall below $1,600 to hit a six-year low of $1,554 in late November, LME spot lead has been range-bound between $1,600 and $1,800. The metal’s price rose to a high of $1,818 on Thursday last week, but fell back to close below $1,800 — the upper end of the range at $1,771. Price action in the coming weeks will need a close watch as it would decide whether the metal will stay in the $1,600-1,800 range or break above $1,800 to rise further.
A strong break and a decisive weekly close above $1,800 can increase bullish momentum and take it higher to $1,850 immediately. A further move above $1,850 can see the rally extending towards the next target of $1,900.
The lack of follow-through selling below $1,600 is a positive. Also, the metal has been moving inside a channel since October 2012. Since August 2015, this channel support in between $1,650 and $1,600 has been consistently limiting the downside and is providing a strong support. This is why a decisive weekly close above $1,800 will not just boost the bullish momentum, but also signal that the channel is intact. This increases the possibility of the LME spot testing $2,000 in the coming months.
On the domestic front, the recent rally in the MCX-lead futures contract is signalling a break-out of the range-bound movement that has been in place for more than six months since June 2015.
The contract is hovering near the 200 and 100-week moving averages, which are poised between ₹120 and ₹121. A strong rise above ₹121 can take the contract higher to test the next important resistance at ₹130 in the coming weeks. A further break above ₹130 can take the contract higher to ₹140. The contract has formed a strong base in between ₹110 and ₹105. The outlook will turn bearish only on a strong fall below ₹105. Such a fall will increase the danger of the contract falling to ₹100 and ₹98 thereafter.
Short-term view
The short-term trend for lead is higher. The MCX lead futures contract has broken above an important resistance at ₹117. Immediate support is at ₹119 and then a significant support is at ₹117. As long as it stays above these supports, there is no immediate danger of a sharp fall in the contract.
Intermediate dips to these supports may see new buyers coming into the market. At the moment, the downside is expected to be limited to ₹117.
A rise to test the next resistance at ₹127 looks likely in the coming days. The outlook will turn negative for a fall to ₹115 and ₹112 only if the contract declines below ₹117.
If the contract manages to surpass the immediate hurdle at ₹127, it can rise further to ₹130.
Increase in Chinese imports and a weak dollar have helped the metal reverse
Saturday, February 6, 2016
"A Key Technical Indicator Just Rang The Bell On The Cyclical Bull Market"
While the primary topic of Albert Edwards' most recent note is the question how long China can sustain its FX intervention before tapping out and letting the hedge funds win with their short Yuan bets once total reserves drop below the critical redline of $2.7 trillion (the answer incidentally is between 5 months and 10 months assuming monthly reserve burn rates of $130BN to $60BN), we will skip that part as we have discussed it extensively in the past, and instead will fast forward to some chart porn by the SocGenarian.
Here is Albert Edwards showing that the S&P had breached key moving averages normally seen at the start of a bear market.
Back in the mid-1990s I spent three memorable years working at Bank America Investment Management, among some of the industry’s finest. Having previously spent three years as an economist at the Bank of England, I was new to markets and I let my economic enthusiasm often get the better of me when making recommendations to fund managers.I remember the head of fixed income explaining to me it was far better not to try and pick market tops or bottoms but to wait and observe the market turn, making the trade late rather than prematurely trying to pick the bottom or top.So the chart below is notable, showing that key 200d and 320d moving averages for the S&P have just been breached to the downside. If one is looking for key technical indicators to ring the bell on the cyclical bull market- maybe it has just rung loud and clear.A renminbi devaluation will only sever an already badly frayed safety rope.
Tuesday, February 2, 2016
Budget goodies for GIFT, markets likely
Ministry considering tax sops for India's first global financial centre, steps to liberalise futures and options markets.
Finance Minister Arun Jaitley and his team are believed to be considering steps to attract big names in investment banks and global brokerage and trading firms to the Gujarat International Finance Tec-City, known as GIFT City. On the banks of Sabarmati in Gandhinagar, Gujarat, the city has been positioned as a "global financial centre".
Conceived in 2007 by Prime Minister Narendra Modi, then Gujarat's chief minister, the city has had a slow start. The coming Budget could offer substantial tax breaks and possibly a 10-year tax holiday, sources familiar with the developments said, adding exemptions from securities transaction tax (STT) and commodity transaction tax were among the incentives being considered for the GIFT City. However, a decision has not been taken, an official said.
The finance minister is also likely to announce a number of capital market-related reform measures, including removal of STT and stamp duties on trading futures and options, clarification on tax treatment in the exchange-traded currency derivative markets and regulatory positions on participatory notes. Removing regulatory constraints on banks and mutual funds to participate in commodity futures, among others, were also being discussed, a senior government official said.
Classified as a special economic zone (SEZ), GIFT city is being set up on the lines of global financial and information technology services hubs like Shinjuku (Tokyo), Lujiazui (Shanghai), La Defense (Paris) and the London Dockyards. It is aimed at attracting firms to open offshore banking as well as insurance and capital market intermediaries. According to existing provisions in the Act, SEZs are already allowed duty-free imports and are exempt from indirect taxes, besides 100 per cent income-tax exemption on export income for units for the first five years, 50 per cent for the next five years and 50 per cent of the ploughed back export profit for another five years.
The developers and co-developers are given an income-tax holiday for 10 years under section 80IAB.
"The government will definitely have to provide tax incentives to attract units in GIFT. Dubai International Financial Centre, for instance, provides zero tax rates. I am not sure if that will be possible, but that is the global benchmark for international financial centres," said Rakesh Nangia, managing partner, Nangia and Co. The DIFC offers zero per cent tax rate on income and profits (guaranteed for a period of 50 years), free capital convertibility and wide network of double taxation treaties for UAE incorporated entities.
The GIFT City comes at a time when the government has announced phasing out of corporate tax exemptions. It has said that after March 31, 2017, sunset clauses with regards to tax exemptions will not be renewed. After that, no weighed deduction will be applicable for operation, maintenance and development of export units in SEZs. "It is yet to be decided whether they can exclusively incentivise GIFT," said the official quoted above.
Apart from GIFT City, the budget-planners are said to be looking at measures to make India's equity, commodity and currency futures more competitive and liberalising them further. Some other measures could include lifting specific bans on any market segment, participant or product, making trading and clearing rules nationality-neutral and participant-neutral, allowing access to all foreign participants, as long as they meet financial action task force requirements, and over a longer-term period, getting in uniform know-your-customer norms, internationalising the rupee, and moving to a residence-based taxation regime.
The genesis of these suggestions is a report by the standing council on international competitiveness of the Indian financial sector. The council was set up in 2013 and its report was made public only in September. The finance ministry had requested various financial regulators, including the Reserve Bank of India (RBI) and Securities and Exchange Board of India, to examine the report. "The regulators are coming back to the finance ministry with suggestions on which recommendations can or should be implemented. The suggestions on which there is agreement among all stakeholders could be part of the Budget," said another official.
Regarding STT and stamp duty, the report had said that since the two levies add to transaction costs in equity derivatives, "STT should be removed. Stamp duty should not be applicable to cash-settled products such as index derivatives, as there is no delivery of the underling (product) taking place."
STT, announced by then finance minister P Chidambaram in the first Budget of the earlier government, is now levied on all sale transactions on futures and options. It is 0.01 per cent of the traded price of futures and 0.017 per cent on options premiums. A 0.125 per cent STT is payable on the settlement price by the buyer of an option that is exercised. If STT is paid, there is no long-term capital gains tax. But, if it is not paid, the latter is levied at 10 per cent.
The panel's report had divided its recommendations into three categories - short, medium and long-term - based on the nature of the reforms and the time that may be required to implement them. Longer term measures included internationalizing the rupee.
Internationalization refers to a state where exporters from other countries agree to take payment in rupees and where the currency risks in international borrowings are borne by lenders rather than borrowers in India. According to RBI, countries that can borrow in their own currency are less susceptible to international crises. "Consider a time-bound plan for internationalization of the rupee, in line with the plans of the Chinese government for internationalization of the renminbi," the report had stated.
Conceived in 2007 by Prime Minister Narendra Modi, then Gujarat's chief minister, the city has had a slow start. The coming Budget could offer substantial tax breaks and possibly a 10-year tax holiday, sources familiar with the developments said, adding exemptions from securities transaction tax (STT) and commodity transaction tax were among the incentives being considered for the GIFT City. However, a decision has not been taken, an official said.
The finance minister is also likely to announce a number of capital market-related reform measures, including removal of STT and stamp duties on trading futures and options, clarification on tax treatment in the exchange-traded currency derivative markets and regulatory positions on participatory notes. Removing regulatory constraints on banks and mutual funds to participate in commodity futures, among others, were also being discussed, a senior government official said.
Classified as a special economic zone (SEZ), GIFT city is being set up on the lines of global financial and information technology services hubs like Shinjuku (Tokyo), Lujiazui (Shanghai), La Defense (Paris) and the London Dockyards. It is aimed at attracting firms to open offshore banking as well as insurance and capital market intermediaries. According to existing provisions in the Act, SEZs are already allowed duty-free imports and are exempt from indirect taxes, besides 100 per cent income-tax exemption on export income for units for the first five years, 50 per cent for the next five years and 50 per cent of the ploughed back export profit for another five years.
The developers and co-developers are given an income-tax holiday for 10 years under section 80IAB.
"The government will definitely have to provide tax incentives to attract units in GIFT. Dubai International Financial Centre, for instance, provides zero tax rates. I am not sure if that will be possible, but that is the global benchmark for international financial centres," said Rakesh Nangia, managing partner, Nangia and Co. The DIFC offers zero per cent tax rate on income and profits (guaranteed for a period of 50 years), free capital convertibility and wide network of double taxation treaties for UAE incorporated entities.
The GIFT City comes at a time when the government has announced phasing out of corporate tax exemptions. It has said that after March 31, 2017, sunset clauses with regards to tax exemptions will not be renewed. After that, no weighed deduction will be applicable for operation, maintenance and development of export units in SEZs. "It is yet to be decided whether they can exclusively incentivise GIFT," said the official quoted above.
Apart from GIFT City, the budget-planners are said to be looking at measures to make India's equity, commodity and currency futures more competitive and liberalising them further. Some other measures could include lifting specific bans on any market segment, participant or product, making trading and clearing rules nationality-neutral and participant-neutral, allowing access to all foreign participants, as long as they meet financial action task force requirements, and over a longer-term period, getting in uniform know-your-customer norms, internationalising the rupee, and moving to a residence-based taxation regime.
The genesis of these suggestions is a report by the standing council on international competitiveness of the Indian financial sector. The council was set up in 2013 and its report was made public only in September. The finance ministry had requested various financial regulators, including the Reserve Bank of India (RBI) and Securities and Exchange Board of India, to examine the report. "The regulators are coming back to the finance ministry with suggestions on which recommendations can or should be implemented. The suggestions on which there is agreement among all stakeholders could be part of the Budget," said another official.
Regarding STT and stamp duty, the report had said that since the two levies add to transaction costs in equity derivatives, "STT should be removed. Stamp duty should not be applicable to cash-settled products such as index derivatives, as there is no delivery of the underling (product) taking place."
STT, announced by then finance minister P Chidambaram in the first Budget of the earlier government, is now levied on all sale transactions on futures and options. It is 0.01 per cent of the traded price of futures and 0.017 per cent on options premiums. A 0.125 per cent STT is payable on the settlement price by the buyer of an option that is exercised. If STT is paid, there is no long-term capital gains tax. But, if it is not paid, the latter is levied at 10 per cent.
The panel's report had divided its recommendations into three categories - short, medium and long-term - based on the nature of the reforms and the time that may be required to implement them. Longer term measures included internationalizing the rupee.
Internationalization refers to a state where exporters from other countries agree to take payment in rupees and where the currency risks in international borrowings are borne by lenders rather than borrowers in India. According to RBI, countries that can borrow in their own currency are less susceptible to international crises. "Consider a time-bound plan for internationalization of the rupee, in line with the plans of the Chinese government for internationalization of the renminbi," the report had stated.
MARKET BOOSTERS
- FM may announce tax breaks, 10-year tax holiday for GIFT City on the lines of the existing special economic zone rules
- Other capital market-related announcements aimed at further opening up of derivatives markets
- Removal of securities transaction tax and stamp duty on futures & options being considered
- Removal of constraints on banks and MFs to participate in commodity futures
- Longer-term aim of internationalising the rupee could be announced
Gold price jumps to 3 month high
With weakness returning to equities and crude oil on Monday, gold futures trading in New York attracted brisk buying from investors eager for alternatives amid all the market turmoil.
In afternoon trade gold for delivery in April, the most active contract, was exchanging hands for $1,129.30 an ounce, up $12 or more than 1% compared to Friday's close and at its its highs for the day.
Thanks to safe haven buying gold’s trading at a 3-month high and is now up 7.5% since hitting a near six-year low mid-December.
Across 24 commodity futures markets money managers entered a net long position for the first time in five weeks
Large futures speculators or "managed money" investors such as hedge funds dramatically raised bearish bets on gold during the final months of 2015. Net short positioning – bets that gold could be bought back at a lower price in the future – hit a record 2.4 million ounces during the final trading week of 2015.
This year however hedge funds have been non-stop buyers pushing overall positioning firmly back in the black. According to the CFTC's weekly Commitment of Traders data released on Friday speculators added to long positions – bets that prices will rise – and trimmed short positions, leading to a more than 10-fold increase in net longs.
Speculators also added 55% to net silver long positions while copper bulls came roaring back trimming overall short position by a third. Platinum longs were increased and shorts cut, but bullish palladium bets declined from the previous week. Both PGMs remain in small net long positions.
Across 24 commodity futures markets money managers reduced bearish bets, entering a net long position for the first time in five weeks according to data by Saxo Bank.
Better sentiment towards crude oil was the most notable feature of as bullish bets increased by 34% – the biggest percentage jump since 2010. Traders may be regretting the shift with US benchmark crude oil prices plummeting 6.2% to $31.50 a barrel on Monday.
At the start of the year, across all commodity futures net short positions increased to 112,000 lots, the highest since government records began in 2009.
Wednesday, January 27, 2016
Commodity Market Holiday Schedule 2016, LME COMEX NYMEX SHFE
| Jan 01 2016 | New Year's Day (Observed) | LME / COMEX / NYMEX / SHFE |
| Jan 18 2016 | Dr. Martin Luther King, Jr. (Observed) | COMEX / NYMEX |
| Feb 08 2016 | Spring Festival | SHFE |
| Feb 09 2016 | Spring Festival | SHFE |
| Feb 10 2016 | Spring Festival | SHFE |
| Feb 11 2016 | Spring Festival | SHFE |
| Feb 12 2016 | Spring Festival | SHFE |
| Feb 15 2016 | Presidents Day | COMEX / NYMEX |
| Mar 25 2016 | Good Friday | LME / COMEX / NYMEX |
| Mar 28 2016 | Easter Monday | LME |
| Apr 04 2016 | Tomb-sweeping Day | SHFE |
| May 02 2016 | Labor Day | SHFE |
| May 02 2016 | Early May Bank Holiday | LME |
| May 25 2016 | Memorial Day | COMEX / NYMEX |
| May 30 2016 | Spring Bank Holiday | LME |
| Jun 09 2016 | Dragon Boat Festival | SHFE |
| Jun 10 2016 | Dragon Boat Festival | SHFE |
| Jul 04 2016 | Independence Day | COMEX / NYMEX |
| Aug 29 2016 | Summer Bank Holiday | LME |
| Sep 5 2016 | Labor Day | COMEX / NYMEX |
| Sep 15 2016 | Mid-autumn Festival | SHFE |
| Sep 16 2016 | Mid-autumn Festival | SHFE |
| Oct 03 2016 | National Day | SHFE |
| Oct 04 2016 | National Day | SHFE |
| Oct 05 2016 | National Day | SHFE |
| Oct 06 2016 | National Day | SHFE |
| Oct 07 2016 | National Day | SHFE |
| Nov 24 2016 | Thanksgiving | COMEX / NYMEX |
| Dec 26 2016 | Christmas Holiday (Observed) | LME/ COMEX / NYMEX |
| Dec 27 2016 | Boxing Day | LME |
| Jan 02 2017 | New Year's Day (Observed) | LME / COMEX / NYMEX / SHFE |
* COMEX/NYMEX early closing on any business day preceding a holiday. | ||
MCX / NCDEX Holiday Schedule 2016
| Particulars | Date | Days | Morning Session (10:00 AM to 05:00 PM) | Evening Session (05:00 PM to 11:55 PM) |
| New Year´s Eve | 01-01-2016 | Friday | Open | Closed |
| Republic day | 26-01-2016 | Tuesday | Closed | Closed |
| Mahashivratri | 07-03-2016 | Monday | Closed | Open |
| Holi | 24-03-2016 | Thursday | Closed | Open |
| Good Friday | 25-03-2016 | Friday | Closed | Closed |
| Dr. Ambedkar Jayanti | 14-04-2016 | Thursday | Closed | Open |
| Ram Navami | 15-04-2016 | Friday | Closed | Open |
| Mahavir Jayanti | 19-04-2016 | Tuesday | Closed | Open |
| Maharashtra Day/ May Day (Labour Day) | 01-05-2016 | Sunday | Closed | Closed |
| Buddha Pornima | 21-05-2016 | Saturday | Closed | Closed |
| Ramzan ID (Id-Ul-Fitar) | 06-07-2016 | Wednesday | Closed | Open |
| Independence Day | 15-08-2016 | Monday | Closed | Closed |
| Ganesh Chaturthi | 05-09-2016 | Monday | Closed | Open |
| Bakri ID (Idu’L Zuha) | 13-09-2016 | Tuesday | Closed | Open |
| Gandhi Jayanti | 02-10-2016 | Sunday | Closed | Closed |
| Dussera | 11-10-2016 | Tuesday | Closed | Open |
| Moharum | 12-10-2016 | wednesday | Closed | Open |
| Diwali (Laxmi Puja) | 30-10-2016 | Sunday | Closed | Open from (5 pm to 9.00 - 9.30 pm) |
| Diwali - Balipratipada | 31-10-2016 | Monday | Closed | Open |
| Guru Nanak Jayanti | 14-11-2016 | Monday | Closed | Open |
| Id-E-Milad (Prophet Mohammad´s Birthday) | 12-12-2016 | Monday | Closed | Open |
| Christmas | 25-12-2016 | Sunday | Closed | Closed |
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