Weekly Report: Metals & Energy 

( Jan 16– Jan 20, 2017)

Gold prices rallied 1.77 percent and silver 1.35 percent last week, as the US dollar sank after President-elect Donald Trump's highly-anticipated press conference failed to offer details on his plans to boost fiscal spending and cut taxes.

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Trump has been credited with being a major catalyst behind the impressive rally since Election Day in the dollar and stocks, although he has yet to outline his economic policies in detail. He will officially take office on January 20.

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Precious metals have been well-supported in recent sessions after minutes from the Federal Reserve’s December meeting unsettled investors’ expectations about the pace of future interest rate hikes.

Weekly Highlights

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The Fed had indicated in December that at least three rate increases were in the offing for 2017, according to a forecast of interest rates from members of the central bank, known as the dot-plot.

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Global oil prices settled lower last week, as speculators are taking a break from making bullish bets. This is removing some of the momentum from the market, which had been rallying for the last month.

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Saudi Arabia and Kuwait last week disclosed that they have cut more than they had promised, hoping the reductions will help make up for some non-compliance elsewhere. Saudi output is down below 10 million barrels per day and officials said it could slip further in February. However, the US is not cooperating with OPEC, and that factor is hurting

Inside this issue:

global prices as well.

Highlights

1

Week Ahead

1

Weekly Levels

2

Bullion Fundamental

3

Bullion Technicals

4

Base Metals

5-6

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Crude stockpiles in the U.S. rose last week by 4.1 million barrels, according to EIA. Gasoline stocks also increased.

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Natural gas ended last week on strong footing higher by 3.92 percent or Rs.8.80. Gas futures extended sharp gains, climbing to a more than one-week high after data showed that supplies in storage in the US fell more than expected last week.

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The US Energy Information Administration said in its weekly report that natural gas storage in the US declined by 151 billion cubic feet in the week ended January 6, exceeding market expectations for a drop of 144 billion cubic feet.

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Natural-gas markets have been volatile in recent weeks, changing course rapidly in response to shifting outlooks in short-term weather patterns.

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Elsewhere in metals, base metal prices rose strongly last week on the back of China's producer price index (PPI) hitting a five-year high and on recent weakness in US Dollar index. Base metals broadly rallied on strong Chinese data and looming supply crunches. Aluminium ended the week higher by 5.83 percent, lead put on 11.31 percent, zinc was up 6.32 percent. Copper rallied 5.66 percent and nickel ended the week higher by 1.36 percent.



Energy

later this week.



Overview 7

For the week ahead, investors are looking forward to a highly-anticipated speech by British Prime Minister Theresa May and US President-elect Donald Trump's inauguration Global financial markets will continue to focus on US President-Elect Donald Trump as he takes the Oath of Office and offers his inaugural address on Friday. Investors will welcome any detail he may give on his promises of tax reform, infrastructure spending and deregulation, as well as insight regarding policies on China and the domestic

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Fundamentals Energy Technicals

8

US Economic

9

Week Ahead Buy : Natural Gas

Last week saw natural gas prices pushing below $3.10/mmbtu or Rs.212.10/mmbtu at one point but the bearishness quickly corrected itself after weather model updates show colder than normal temperatures across most of the US.

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Over the past week, several model updates reflected more bullish weather outlook for the end of January, and forecasters are now starting to see the trend continuing into February.

Calendar 1

WEEKLY LEVELS Commodity

S1

S2

R1

R2

GOLD

28230

28080

28900

29300

SILVER

40600

40200

42000

42700

COPPER

400.00

392.00

408.00

416.00

ZINC

184.00

181.00

192.00

196.00

NICKEL

680.00

665.00

725.00

740.00

ALUMINIUM

122.50

121

126.00

130.00

LEAD

154.00

150.00

162.00

167.00

CRUDE OIL

3470

3410

3590

3660

NATURAL GAS

225.00

218.00

245.00

253.00 2

Precious Metals BULLION FUNDAMENTALS GOLD 

Gold ended a bit lower on Friday as investors took profits after prices hit a seven-week peak on Thursday, but still prices notched up a third consecutive weekly gain. The metal has given around 2 percent of gains for the week, helped by a broad weakening of the U.S. dollar.

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The U.S. dollar index posted its largest weekly decline since late October, shedding 1 percent as optimism cooled over President-elect Donald Trump’s economic policy proposals.

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The drop in the dollar came after Trump disappointed traders who had been hoping he would address economic and fiscal policies in his first formal news conference as U.S. president-elect.

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The dollar had rallied to 14-year peaks earlier this month on expectations that Trump's policies would spur growth and inflation and prompt the Federal Reserve to raise interest rates more quickly. Trump will officially take office on January 20.

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In the week ahead, financial markets will continue to focus on U.S. President-elect Trump ahead of his inauguration on Friday.

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Investors will also be looking ahead to Thursday’ policy announcement by the European Central bank and Chinese data on fourth quarter growth, due for release on Friday this week.

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Prime Minister Theresa May on Tuesday will call on Britons to reject the acrimony of the Brexit referendum in a speech that some newspapers have billed as setting the stage for a "hard" exit from the EU.

SILVER 

Silver ended higher for third consecutive week ending at Rs.40887/kg up by 1.35 percent or Rs.545. White metal has moved appreciably higher so far in 2017 gaining over 5 percent.

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Weakness in US dollar also boosted prices after dollar index posted its largest weekly decline since late October, shedding 1.0 percent as optimism cooled over President-elect Donald Trump’s economic policy proposals.

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The drop in the dollar came after Trump disappointed traders who had been hoping he would address economic and fiscal policies in his first formal news conference as US president-elect. The dollar had rallied to 14-year peaks earlier this month on expectations that Trump's policies would spur growth and inflation and prompt the Federal Reserve to raise interest rates more quickly. Trump will officially take office on January 20.

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Silver seems to have established at least a temporary bottom and the precious metal is doing all the things right for a rebound. Some technical changes are getting underway which could remove the bears and bring in gains in the coming weeks. $16.60/oz or Rs.40500 should act as a near-term cushion for the commodity however, white metal needs to take out $17.20/oz or Rs.41400/kg to negate bearish trading pattern.

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Precious Metals BULLION TECHNICALS GOLD Prices made a hat trick on weekly time frame where counter gained 1.77 percent last week. A strong tone is visible on price chart while prices are heading in upward territory. Going forward, trend is likely to be on the track for coming week and positive breath should continue in the counter. Furthermore, prices can find support near Rs.28230/10gms levels while having standstill base at Rs.28080/110gms levels for a week perspective. On the other side, counter seems to mark further highs near Rs. 28900/10gms levels as momentum indicators are in sync with prices. Having said that, it would be buy on dip strategy for next week.

SILVER Silver shine was intact for the third consecutive week which rewarded traders with 1.35 percent gains. Prices gained initially but found hurdle near Rs.41350/kg levels for rest of the week. However, counter remained in positive zone and should resume its upward journey after a pause. For the coming week, prices may correct near Rs.40600/kg levels where traders can find it attractive to initiate long trades, while considering Rs.40200/ kg as a key support for near term. However, prices could reflect positive bias after a correction and could move higher towards Rs.42000/kg mark. As a strategy, traders can look for retracements to walk on a ‘buy’ path.

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Base Metals BASE METALS’ OVERVIEW FUNDAMENTALS

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Copper hit a five-week high on Friday on optimism about metals demand following strong

Copper Technicals

economic data from top metals consumer China and the United States.

It was a tall white tower for red metal where prices secured 5.66 percent on a weekly basis. The daily chart looks like a beautiful saucer which is about to complete. Moving forward, prices may cool off after recent surge as volumes are not supportive on higher levels. One can find previous swing high of Rs.414.80/kg levels as major resistance and bears can snatch the grip of control from bulls. Also, RSI is in overbought territory and could take a hit any time soon. As a recommendation, traders can take a counter bet and can sell copper on rise near Rs.408/kg levels with stop loss of Rs.416/kg levels for target zone of Rs.392-394/kg levels.

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Copper gained over five per cent on the week, the biggest weekly rise since late November.

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Underlining strong demand was data on Friday showing China shipped in a record 4.95 million tonnes of copper in 2016, up 2.9 per cent from a year earlier, with December imports up almost 30 per cent from the previous month.

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Total copper mine production rose 3.8 per cent last year to 19.9m tonnes. In part this was a reflection of increased output from Peru where several projects including Las Bambas successfully ramped up.

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Workers at the world’s biggest copper mine Escondida in Chile, have already rejected the first wage offer from operator BHP Billiton, in talks that are set to go down to the wire. A final proposal is expected on January 23 with workers likely to vote on the package the following day.

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Data showed on Thursday that Chinese banks extended 1.04 trillion yuan in net new yuan loans in December, far more than economists had expected.

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On Friday, data showed US retail sales rose in December amid strong demand for automobiles and furniture, while producer prices showed the biggest year-on-year gain in just over two years.

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Nickel prices hit down earlier during the last week after Indonesia eased a ban on ore exports.

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Indonesia introduced new rules on Thursday that will allow exports of nickel ore and bauxite and concentrates of other minerals under certain conditions in a sweeping policy shift by the big global supplier.

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However prices regained along with its base metals’ batch on signs of demand recovery in world’s largest producer and consumer China.

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Nickel Technicals Nickel prices remained volatile throughout the week but finally managed to close in a positive zone. Pressure was visible on higher levels near Rs.725/kg mark, where supply turned strong to knock down prices. For the week ahead, prices are trading near 20 DEMA and could face hurdle on higher side. One can opt for sell on rise strategy for nickel where hurdle could be seen near Rs.740/ kg levels. On the other hand, price could come down towards Rs.680/kg and further could extend near Rs.665/kg levels. Having said that, sell on rise is recommended bet for next week.

Gains were limited after the comment from the top mining officials that “Indonesia’s abrupt easing of a three-year ban on nickel ore exports will not flood the global nickel market but instead is aimed at balancing the country’s smelters and creating job opportunities at mines”.

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Base Metals BASE METALS’ OVERVIEW FUNDAMENTALS 

Last week zinc rose to its highest level in three weeks as the US dollar fell and on expectations of a continued shortage in supply for the metal used to galvanise steel.

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Zinc, the best performing metal, rose 60 per cent in 2016 fuelled by fears of shortages after some major mines were closed or suspended.

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Barclays said in a note it expected tightness in the zinc market to "remain supportive as concentrate shortages could lead to smelter outages outside China".

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Zinc Technicals Zinc prices were stepping higher on the staircase and ceased the week with nearly 6 percent gains. Prices gained momentum with the beginning and kept the pace throughout the week. On technical indicators, MACD is strong on daily as well on weekly time frame, while prices are trading above its monthly average price. While price chart shows positive tone, traders should look for dips to enter in to long trades. Level wise, prices may find immediate base at Rs.181/kg levels and could be used as protective stop loss, whereas Rs.192/kg would be a key hurdle to cross. As a strategy, buy on dip would be favorable for coming week.

J.P. Morgan expects the zinc bull rally to extend into the first half of this year and said any declines in prices would be short term as it would be outpaced by its "strong fundamentals story".

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The bank also said it has lowered its expectations of an announcement of mine restarts from Glencore.

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Aluminium rose to its highest in nearly 20 months, supported by expectations that Chinese smelters would shut over the northern hemisphere winter, as authorities in China encourages plants to close in order to curb pollution and free up scarce coal supplies for heating.

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The Indonesian government eased out export of bauxite with an aluminium oxide content of 42% or greater, however in certain amounts.

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Aluminium prices were further buoyed on Friday amid rumours that China is planning to

Aluminium Technicals Aluminium ended the week on a high note closing up by Rs.6.80 or 5.83 percent at Rs.123.45/kg. Prices found strong support around $1,700/t or Rs.116/kg and brought strong rebound. During the week upward momentum gathered pace and prices closed above key technical level at $1780/t or Rs.122.50/kg. On technical development, strong support from 50 days daily EMA is seen as a sign of underlying bullishness along with bullish divergence conditions on daily MACD. On the upside, prices are most likely to remain supported and test higher grounds at $1860/t or Rs.125.75/kg. On the downside, prices may consolidate sideways but downside should be contained above $1780/t or Rs.122.50 to bring rally resumption. For the week ahead, traders are advised to buy aluminium at Rs.122.50/kg keeping stop loss below Rs.120.50/kg and targeting Rs.125.75/kg.

cut electrolytic aluminium and aluminium oxides capacities in three of its provinces. 

Rumours suggest that China will remove 30% of electrolytic aluminium capacity as well as 50% of aluminium oxide capacity in three provinces: Henan, Shandong and Shanxi.

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Lead prices hit multi week highs last week amid talk that there could be cutbacks to production.

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Talk of supply disruption underpinned lead prices. Yunnan Chihong announced earlier last week that it will cut some lead smelting output due to low treatment charges for concentrate.

Lead Technicals It was a power packed performance where metal earned more than 11 percent. A white fair candle showcases the strength of bulls that were in command for last three weeks. Furthermore, it is not likely to get over soon. Prices are heading upward with single day correction pattern which is a sign of strong momentum in prices. Moving forward, trend seems to continue and price may surge ahead towards Rs.162/kg levels. Though, momentum is on buy side, it is viable to look for a correction and then to ride the trend. With this view, traders can buy lead near Rs.153-151/kg levels, for the target price of Rs.162/kg levels, while keeping a protective stop loss of Rs.148/kg levels. 6

Energy ENERGY FUNDAMENTALS

CRUDE OIL 

Oil futures finished lower on Friday, logging their first weekly decline in five weeks amid doubts over the implementation of a planned deal by global crude producers to scale back output.

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For the week, oil futures lost around 3 percent, after posting gains in each of the previous four weeks.

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January 1 marked the official start of the deal agreed by OPEC and non-OPEC member countries such as Russia in November last year to reduce output by almost 1.8 million barrels per day.

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The deal, if carried out as planned, should reduce global supply by about 2%. However, some traders remain skeptical that the planned cuts will be as substantial as the market currently expects.

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While major oil producers, such as Saudi Arabia and Kuwait, have so far showed signs that they are sticking to their pledge to cut back output, others, such as Libya have ramped up production.

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OPEC plans to release its monthly oil report on January 18 and the IEA’s monthly report is due the day after, but both would come just over two weeks after the output cuts officially began.

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As a result, markets will have to wait until the January report in mid-February for further evidence that OPEC members are adhering to planned output cuts.

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Meanwhile, market players shrugged off a report showing a downtick in U.S. drilling activity last week. According to oilfield services provider Baker Hughes, the number of rigs drilling for oil in the U.S. last week decreased by 7 to 522. That was the first decline in the oil-rig count in 10 weeks.

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Energy Information Administration reported a build of 4.1 million barrels in crude oil inventories for the week to January 6, a day after the American Petroleum Institute had estimated inventories were 1.5 million barrels higher in the period. Reuters expected EIA to report a build of 930,000 barrels. Last week, the agency reported a weekly decrease of 7.1 million barrels.

NATURAL GAS 

Natural gas prices finished the week up 3.92 percent or Rs.8.80 at Rs.233.10/mmbtu.

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Last week saw natural gas prices pushing below $3.10/mmbtu or Rs.212.10/mmbtu at one point but the bearishness quickly corrected itself after weather model updates show colder than normal temperatures across most of the U.S.



Over the past week, several model updates reflected more bullish weather outlook for the end of January, and forecasters are now starting to see the trend continuing into February.



Data from the U.S. Energy Information Administration report revealed that supplies of natural gas fell by 151 billion cubic feet for the week ended Jan. 6. That was more than the 137-billion-cubic-feet decline expected by S&P Global Platts.

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Inventories for the previous week, however, had fallen by just 49 bcf—less than half of some market expectations as warmer than usual weather dulled demand for the heating fuel. 7

Energy ENERGY TECHNICALS

CRUDE OIL Crude oil pared four week long tail while settling in 2.61 percent loss. A doji structure and a gap down open with lower close last week is a nice combo to look for a reversal signal. Also, RSI is inching lower and advocates pressure building on higher levels. One can find Rs.3650/ bbl levels as major resistance for next week and sell on rise would be appropriate with mentioned resistance. Furthermore, counter may face pressure and could correct lower towards immediate support at Rs.3470/bbl and could next inch lower towards Rs.3410/bbl levels. Going forward, traders can sell crude oil near Rs.3580-3590/bbl for target price of Rs.3430/bbl levels with stop loss of Rs.3660/bbl.

NATURAL GAS Gas prices fired up after a deep correction in recent weeks, while gaining 3.90 percent last week. After managing lower ground in initial part, prices geared for U turn and headed north way. Looking in to recent price behavior, counter may find momentum in coming days. Oscillators are inching higher from lower territory and support prices. Moving ahead, corrections would be welcome buying opportunity while regarding Rs.225/mmbtu as key support for the trades. On the higher side, prices could rise towards Rs.245-248/mmbtu levels. For the next week, buy natural gas near Rs.230-232/ mmbtu, with stop loss of Rs.225/mmbtu for the target price of Rs.245/mmbtu levels.

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economy.

Date

Time

Name

For

Consensus

Previous

Importance

18-Jan

0:00

Empire State New York Fed Manufacturing Index

Jan. 2017

9

9

High

18-Jan

19:45

Industrial Production

Dec. 2016

0.6 %

-0.4 %

High

19-Jan

0:00

Core CPI

Dec. 2016

0.2 %

0.2 %

Very High

19-Jan

0:00

CPI

Dec. 2016

0.3 %

0.2 %

Very High

19-Jan

1:30

NAHB Housing Market Index

Jan. 2017

69

70

Very

19-Jan

1:30

Fed Chair Yellen Speaks

19-Jan

19:00

Initial Jobless Claims

w/o Jan. 8

19-Jan

21:00

EIA Weekly Natural Gas Stocks Change

19-Jan

21:30

20-Jan

Very High 247 K

Very High

w/o Jan. 7

-151 Bcf

Very High

EIA Weekly Crude Oil Stocks Change

w/o Jan. 7

4.1 Mbpd

Very High

0:00

Philly Fed Manufacturing Index

Jan. 2017

16

19.7

Very High

20-Jan

0:00

Housing Starts

Dec. 2016

1.19 M

1.09 M

Very High

20-Jan

0:00

Building Permits

Dec. 2016

1.23 M

1.2 M

Very High

20-Jan

22:30

US President Trump Speaks

Dec. 2016

1.23 M

1.2 M

Very High

Sugandha Sachdeva

| In-charge-Metals, Energy & Currency

Vipul Srivastava

Gaurav Sharma

| Sr. Analyst, Metals, Energy & Currency

Nirmal Tewari

Rahul Sharma

US Economic Calendar

254 K

| Analyst, Metals & Energy

Jan 16– Jan 20, 2017

Research Team

| Analyst, Metals , Energy & Currency

| Research Associate, Metals & Energy

Source: Reuters, Investing.com, briefing.com

EMAIL ID: [email protected] Disclaimer: http://www.religareonline.com/disclaimer

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