Jim Rogers Bullish On Base Metals

Weekly Economic Data for the week 18-Jan-14 to 24-Jan-14

Data for the week 18-Jan-14 to 24-Jan-14

Date	Time (IST)	Country	Data	Exp.	Prior	Exp. chg today	Avg. chg of last 1 year	Exp. Impact on Price
20-Jan-2014	07-30 AM	China	Gross Domestic Product (YoY)	7.6%	7.8%	-0.20%	0.48	Neutral
20-Jan-2014	07-30 AM	China	Industrial Production (YoY)	9.8%	10.0%	-0.20%	0.67	Neutral
20-Jan-2014	07-30 AM	China	Retail Sales (YoY)	13.6%	13.7%	-0.10%	0.78	Neutral
20-Jan-2014	02-00 PM	European Monetary Union	EU Foreign Ministers Hold Meeting in Brussels
21-Jan-2014	03-30 PM	Germany	ZEW Survey - Current Situation	35	32.4	2.60	5.46	Neutral
21-Jan-2014	03-30 PM	Germany	ZEW Survey - Economic Sentiment	64	62	2.00	12.25	Neutral
22-Jan-2014	-	Japan	BOJ 2014 Monetary Base Target		¥270T		0.00
22-Jan-2014	12-00 PM	Japan	BoJ Governor Kuroda Press Conference After Rate Decision
22-Jan-2014	03-00 PM	United Kingdom	ILO Unemployment Rate (3M)	7.3%	7.4%	-0.10%	0.07	Good
22-Jan-2014	03-00 PM	United Kingdom	Bank of England Releases Monetary Policy Minutes
22-Jan-2014	08-30 PM	Canada	Bank of Canada Rate Decision	1%	1%	0.00	0.00	Neutral
21-Jan-2014	09-45 PM	Canada	Bank of Canada Governor Poloz Press Conference
23-Jan-2014	-	Brazil	Central Bank of Brazil Releases Monetary Policy Minutes
23-Jan-2014	02-30 PM	European Monetary Union	Markit Manufacturing PMI	53	52.7	0.30	0.80	Neutral
23-Jan-2014	08-30 PM	United States	Existing Home Sales (MoM)	4.95M	4.90M	0.05M	0.16	Neutral
23-Jan-2014	08-30 PM	European Monetary Union	Consumer Confidence	-13.0	-13.6	0.60	1.04	Neutral
23-Jan-2014	09-00 PM	United States	EIA Natural Gas Storage change		-287		33.60
23-Jan-2014	09-30 PM	United States	EIA Crude Oil Stocks change		-7.658M		3.45
24-Jan-2014	05-35 PM	United Kingdom	BOE's governor Mark Carney Speaks at World Economic Forum in Davos

Technical Analysis MCX Metals And Energy.

Gold (Rs 29,265) 

The MCX Gold futures contract for 10 gram traded in a narrow range between Rs 28,865 and Rs 29,314 last week. Technically, the contract is holding well above its 200-day moving average support at Rs 28,799. This keeps the short-term bullish outlook intact. Traders can hold on to their long positions and retain the stop-loss at Rs 28,300. A rally to Rs 31,000 looks likely in the coming weeks. The significant resistances are at Rs 29,790 and Rs 29,851. On the downside, the 200-day moving average is the immediate support level. Below this Rs 28,300 is the next significant support. In the medium-term, the contract can range between Rs 28,300 and Rs 31,000. A break out of this range will decide the trend thereafter.

Copper (Rs 458)

After the sharp fall a week before, the 55-day moving average support at Rs 454 a kg has lent some relief to the MCX Copper contract. The immediate outlook is mixed. The 21-day moving average resistance at Rs 463 and the support at Rs 454 are important levels to watch out for. Traders can wait for the contract to breakthrough either levels. If the contract declines below Rs 454, traders can go short with a stop-loss at Rs 459. Target on the downside is Rs 440. If the contract breaches Rs 463, traders can initiate long positions with a stop-loss at Rs 456. Target on the upside is Rs 475.

Crude Oil (Rs 5,777)

The MCX Crude Oil contract has bounced back from the low of Rs 5,640/barrel last week. Immediate support is at Rs 5,700. As long as the contract trades above this support, it can rise to Rs 5,950 or Rs 6,000 in the coming weeks. However, the trend is down and an immediate breach of Rs 6,000 looks less probable. Traders can take short position near Rs 5,950 with a stop-loss at Rs 6,150. In the medium-term, Rs 5,400-5,350 is the key support zone which can halt the downtrend. A reversal from this support zone can take the contract to Rs 8,000 in the long-term.

Natural gas (Rs 266)

The MCX Natural gas contract rose sharply to a high of Rs 276.7 for a million British thermal unit last week. This was in contrast to our view of a fall to Rs 240 . The immediate outlook is not clear. Traders can avoid taking positions until a clear signal emerges. The contract can remain range-bound between Rs 250 and Rs 280 for some time. A strong break above Rs 280 is required to signal a bullish outlook . Target above Rs 280 is Rs 350. But as long as the contract trades below Rs 280, a fall to Rs 220 is possible in the medium-term. Such a fall will be a good buying opportunity for long-term investors.

Zinc (Rs 128)

After two weeks of consecutive fall, the MCX Zinc contract moved up last week. But the contract faces immediate resistance at Rs 129. Only a strong break of this resistance will turn the outlook positive. Failure to breach Rs 129 and a subsequent reversal will be bearish for the contract. In such a scenario, short positions can be initiated with a stop-loss at Rs 132. The contract can fall to Rs 121 initially and then to Rs 115. A reversal from Rs 115 can avoid a further fall to Rs 105. The contract will then move in a sideways range between Rs 115 and Rs 135 in the short-term.

Comex Warehouse Potential Claims Per Deliverable Ounce Rises to Historical High 112 to 1

An almost shocking decline in deliverable (registered) gold has taken the ratio of open interest to deliverable gold to 112 to 1. 

This is not a default scenario since the supply of eligible gold in the warehouses remains adequate and at historically manageable levels as shown in the last chart below. 

Rather, it suggests that higher prices will be required to persuade more bullion owners to place their inventory up for delivery. 

That higher price, of course depends on who those owners are, and how motivated they might be by profits from their metals trades.  For some interested parties it is enough to be the very close friends of the Central Banks, with benefits that make them incredibly rich, self-satisfied, and occasionally audacious to the point of over-reaching.

But of course, it is well to remember that the Comex has become the tail wagging the dog, as the gold bullion markets have shifted to the East. 

Physical Gold Shortage Goes Mainstream

As BNN reports, veteran trader Tres Knippa, pointing to recent futures data, says "there may not be enough gold to go around if everyone with a futures contract insists on taking delivery of physical bullion." As he goes on to explain to a disquieted anchor, "the underlying story here is that the people acquiring physical gold continue to do that. And that’s what is important," noting large investors like hedge fund manager Kyle Bass are taking delivery of the gold they're buying. Knippa's parting advice, buy physical gold; avoid paper.

S&P MONTHLY

Commodities trade dips over 36% in Apr-Dec

Commodities exchanges saw a heavy decline in trading during the first nine months (April-December) of the current fiscal. This comes in the backdrop of all-round deceleration in agri and non-agri commodities trade.

According to the latest data from commodities market regulator Forward Markets Commission (FMC), trade was down both in value and volume terms.

In terms of volume, the total trade declined to 71.22 crore tonnes in April-November 2013-14, from 112.38 crore tonnes in the corresponding period last year. At the same time, the trade value shrunk to Rs 82.46 lakh crore (Rs 129.62 lakh crore).

Market analysts said though commodities transaction tax (CTT) had been imposed only on non-agri commodities, it had impacted the overall mood in the market. As a result, trade value for agri commodities and bullion (gold and silver) saw a significant decline.

Lower volatility and higher bid-offer spread (impact cost) also hit intra-day traders, as transaction costs increased drastically, the analysts said.

This drove away genuine hedgers who felt the pinch of the rise in hedging costs. At the same time, trade volume was impacted by fund diversion from commodities to equities, as riskier asset classes gave better returns in 2013.

The other reason for the decline in trade, the analysts said, was negative sentiments due to the NSEL payment crisis.

Rupee depreciation, too, increased volatility in commodity prices, as did the levy of higher margins and the abnormal spread in future contracts.

On the global front, quantitative easing or tapering by the US by reducing its monthly bond buying programme to $75 billion from $85 billion forced hedge funds and portfolio managers to readjust their portfolios. Since only newer financial companies are getting involved as active counter-parties on commodity exchanges.

Vandana Bharti, Assistant Vice-President (Commodity Fundamental and Research) with SMC, has outlined a strategy to grease the wheels of the market.

More platforms

This includes giving more platforms to corporate hedgers for physical exposure, proactive policies to help the exchanges grow by introducing options, integration with banks and allowing them to participate in the commodity markets and introduction of an e-trading platform as in CME Globex, among others.

“Farmers must want to take advantage of commodity exchanges, banks must trust them, the government must support them and everyone must recognise the value they add,” she said.