Industrial Metals Pricing Affected by Chinese Data

Precious Metals Decline Slightly on US Interest Rate Speculation

Gold’s advance has been halted, after rising in value for two straight weeks, with a slight 0.58% retreat. On Monday the metal continued its previous success by climbing higher on bets that the Fed will delay raising US interest rates on global economic uncertainty. Moreover; Tuesday came with new highs, namely a five-week high at $1,251.7 an ounce, as traders pushed back forecasts for a rate increase by the Fed. According to HSBC Securities, a more dovish Fed view would be interpreted as gold friendly, the prospect for a weaker dollar near term may provide support for bullion. On the fourth day of the week the yellow metal dropped the most in two weeks; although, later it recovered as the festival and wedding season in India, the world’s second biggest consumer, fueled purchases.

Silver continued to fluctuate around the levels seen for the last month, falling 0.86% in the period. Silver price was impacted by the same factors as its yellow peer—US data, uncertainty in the global economy and the equity market. The metal closed $17.18 a pound.

While Platinum performed very similarly to gold and silver by sliding 0.84%, Palladium gained 3.2%. Moreover, platinum has managed to trade above gold through the period, while its ETP holdings slipped to 83.5 metric tons on October 24, the lowest level since May. According to Saxo Bank, without seeing a pickup in ETP holdings, the near-term outlook still looks like one where the price action will be driven by short-term speculative and technical decisions. Ultimately, platinum and palladium closed at $1250.9 and $780.9 a pound, respectively.

Industrial Metals Pricing Affected by Chinese Data

Aluminum reached the highest level since the first part of September; however, its performance was not sustainable enough to hold at this level. At the beginning of the week aluminum’s price similarly as other industrial metals was hurt by China economy’s slowest quarterly expansion since the first three months of 2009. In the second part of the week one of the bigger fears were the forecasts that the euro-factory output contracted for the first time in 15 months; however, data surprised to the upside. The week ended in the same manner as it started with China slow-down worries, this time on signs of a weaker housing market.

Copper managed to post weekly gains of 1.03%, after the weak start of the week, when the metal dropped below $6,600 a metric ton mark. Nonetheless, already on Tuesday copper reversed the losses as the economy expanded more than forecast in China, the world’s biggest user of the metal. According to Marex Spectron Group, between the Chinese GDP being better than expected, stimulus talk in the last couple of days in China and money managers being net short, they are seeing a little bit of a short-covering rally.

Nickel and Zinc performed very differently—the first was a clear worst performer among the industrial metals, while the second was little changed. Nickel is poised for the longest run of weekly losses since 2001 as supply continue to increase to a record on worries that demand is slowing in China. According to Korea Exchange Bank Futures, huge LME inventories, especially in Asia, have worsened nickel’s fundamentals and without a recovery in China’s consumption, it will not be easy to rebound.

Energy Futures Prolong Their Decline on Rising US Supplies

WTI oil extended its slump by falling 1.28% in the week from 20-24th September, posting more limited losses, after the terrible performance lately. Also the crude oil was impacted to the upside by the better than expected China’s economic growth data. However, the rest of the week did not come with that good data, as the price reached the lowest level in three years on Wednesday, after and Energy Information Administration report indicated that US inventories rose more than estimated last week. In the very end of the week WTI oil dropped from the biggest advance since September on bets a decline in Saudi Arabia oil supplies is not a signal that OPEC’s largest producer has decided to cut production.

Brent Oil was little changed as it lost only 0.03% compared to the week before. Early in the week the price was pushed higher, after the already mentioned China’s economic growth data that beat analysts’ estimates. According to Bayerische Landesbank, the market is reacting instantly to any news on oil fundamentals and the whole market has shifted much more toward reaction on supply news on the oil market rather than political moves. Moreover, the price of Brent crude has plummeted about 25% from the highest level this year.

Natural gas and Heating oil declined 3.8% and 0.63%, respectively. Natural gas prolonged its down-trend that started at the beginning of October as the updated weather forecasts continue to call for mild autumn temperatures to gold across much of the US. Mild temperatures mean that most likely demand will be limited for both heating and air conditioning.

Agriculture Futures, Except Coffee, on Harvest Delays

Wheat prices prolonged its advance to four straight weeks; however, in the previous week it managed to climb only 0.34%, as the grain product did not hold Thursday’s gains. Australia’s wheat harvest may fail to reach government’s forecast after frost and hail damaged crops. Moreover, dry conditions across European Russia most likely will decrease nation’s wheat harvest to less than previously estimated 50 million metric tons in 2015.

Corn and Soybeans futures added 1.44% and 2.45%, respectively, on US harvest delays. Corn traded near the highest level in seven weeks through the week as a slowdown in the US harvest last week supported prices. The US Department of Agriculture stated on last Monday that nearly 31% of the US corn harvest was completed as of October 19, which is considerably below the five-year average of 53% for this time of year. While approximately 53% of the US soy harvest was completed as of last week, which also is below the five-year average of 66%, according to USDA. Nevertheless, on Friday the prices declined from a seven-week high on speculation that favorable weather will boost crop estimates to be the biggest ever in the US, the world’s top producer of the crops.

Coffee prices prolonged its two-week long slump, as it dropped significant 9.09% in the period from 20th to 24th October. With that in mind hedge funds pared back their biggest bullish coffee bet since 2008, after rains favored the drought-stricken crops in Brazil, the world’s biggest producer and exporter. According to Wells Fargo, prices were reflecting a continuation of the drought and if it is to end, that would be a new scenario.

EXPLANATIONS

Commodities

• Gold - COMEX active contracted (USD/t o.z.)

• Silver - COMEX active contract (USD/t o.z.)

• Platinum - New York Mercantile Exchange active contract (USD/t o.z.)

• Palladium - New York Mercantile Exchange active contract (USD/t o.z.)

• Aluminum - Active contract of primary aluminum of minimum 99.2% purity at the LME (USD/MT)

• Copper - Active contact of electrolytic copper at the LME (USD/MT)

• Zinc - Active contract of zinc od minimum 99.995% purity at the LME (USD/MT)

• Nickel - Active contract of nickel of 99.8% purity at the LME (USD/MT)

• Crude oil - light, sweet crude oil active contract on the New York Mercantile Exchange (USD/bbl.)

• Brent oil - Brent oil active contract on the ICE Futures Europe (USD/bbl.)

• Natural Gas - natural gas active contract on the New York Mercantile Exchange (USD/MMBtu)

• Heating oil - heating oil active contract on the New York Mercantile Exchange (USD/gal.)

• Wheat - wheat active contract on the Chicago Board of Trade (cents/bu)

• Corn - corn active contract on the Chicago Board of Trade (cents/bu)

• Coffee - benchmark Arabica coffee active contract on the NYB-ICE Futures Exchange

• Soybeans -active contract on the Chicago Board of Trade (cents/bu)

Indices

• S&P GSCI Precious Metals Total Return Index - commodity group subindex composed of gold and silver; the index reflects return on underlying commodity futures price movement

• S&P GSCI Industrial Metals Total Return Index - commodity group subindex composed of futures contracts on aluminium, copper, lead, nickel and zinc

• S&P GSCI Energy Total Return Index - commodity group subindex composed of futures contracts on crude oil, Brent oil, RBOB gas, heating oil, gas oil and natural gas

• S&P GSCI Agriculture Total Return Index - commodity group subindex composed of futures contracts on wheat, red wheat, corn, soybeans, cotton, sugar, coffee and cocoa

Indicators

Long-term price forecasts-aggregated price forecasts based on predictions of 20 international banks forecasts

USDA Wasde Total Estimated Inventories (Today)-current level of inventories of wheat in 1000 MT, corn in 1000 MT, soybeans in million bushels and green coffee in 1000 bags