Commodity ValueGuide - Bullion to outrun industrial metals as trade war escalates - Sharekhan, Commodity

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Commodity ValueGuide - Bullion to outrun industrial metals as trade war escalates - Sharekhan, Commodity
Bullion to outrun industrial
              metals as trade war escalates

            Commodity ValueGuide
            June 2019

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Commodity ValueGuide - Bullion to outrun industrial metals as trade war escalates - Sharekhan, Commodity
CONTENTS

From the Editor’s Desk
Bullions seen outperforming industrials as trade war escalates
Breakdown of the US-China trade talks coupled with Mr Trump threatening tariffs on Mexico and removing India’s export
benefits weighed on the risk assets and gold duly rallied amid the meltdown in the wider markets. The 10-year US
treasuries continued their monstrous rally as the yields fell sharply....                                        04
MONTHLY VIEW
Commodities: Gold rallies sharply on safe demand                                   Events watch- Major economic events                                                     09
                                                 05
as risk assets fall                                                                Agri Ministry forecasts 2018-19 food grain output
                                                                                                                                                                            12
WTI Crude oil                                    06                                at 283.37 million tonne
Natural gas                                                             06         Cotton seed oilcake                                                                      13

Gold                                                                    06         Turmeric                                                                                 13

Silver                                                                  07         Barley                                                                                   13

Zinc                                                                    07
Copper                                                                  08         TREND & VIEW
Lead                                                                    08         Gold: Positive bias                                                                      14

Nickel                                                                  08         Nickel: Trending positive                                                                14

Aluminium                                                               08         Turmeric: Change in trend                                                                14

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Commodity ValueGuide - Bullion to outrun industrial metals as trade war escalates - Sharekhan, Commodity
From the Editor’s Desk
From the Editor’s Desk   Bullions seen outperforming industrials as trade war escalates

                         Breakdown of the US-China trade talks coupled with Mr Trump threatening tariffs on Mexico
                         and removing India’s export benefits weighed on the risk assets and gold duly rallied amid
                         the meltdown in the wider markets. The 10-year US treasuries continued their monstrous rally
                         as the yields fell sharply. The talks of 10 year yields falling to 2% are gaining currency as the
                         bond traders see 3 rate cuts by the end of 2020. The US Federal Reserve Chairman Mr Powell
                         stated that the Fed is closely watching the trade war situation, thus affirming the dovish tilt in
                         the outlook. In this scenario, the global bonds are rallying sharply.
                         Gold, initially lagging the bond rally, ultimately flared up as the risk assets finally started
                         breaking down sharply. Industrial commodities followed risk assets lower as zinc and crude oil
                         tumbled. Silver has been lagging gold on account of the former being the industrial commodity
                         too.
                         The risk assets and industrial commodities are trying to stage a rebound on the rate cut bets.
                         Crude oil has suffered the worst among industrials as the US supply glut continues to outweigh
                         Iran and Venezuela supply concerns.
                         While rate cut possibility is beneficial for the industrial commodities, it is supportive for
                         precious metals too. Thus, in this situation, we see precious metals outperforming the industrial
                         commodities. More so, as the US data have started trailing the forecast, which means that
                         trade issues have started affecting the last major strong economy too.
                         The Ministry of Agriculture released their Third Advance Estimates for 2018-19 wherein it
                         pegged output of food grains at 283.37 million tonne. This was marginally lower compared to
                         the previous year’s record output of 285.01 million tonne. Output of rice was forecast at record
                         115.63 million tonne while output of wheat is pegged at record 101.2 million tonne.
                         Output of coarse cereals is estimated at record 43.33 million tonne while output of pulses is
                         estimated lower at 23.22 million tonne. Output of oilseeds is estimated marginally lower at
                         31.421 million tonne while cotton output may fall to 273.93 lakh bales. Sugarcane output is
                         estimated at record 400.369 million tonne. The onset of monsoon is also delayed and is now
                         expected to touch Kerala around June 8, 2019.
                         In May, cotton seed oilcake stood out as the biggest gainer in the agricultural commodities
                         basket posting 9.57% returns on account of lower output and robust demand from the feed
                         industry. Turmeric and chana were the second and third biggest gainers with 6.87% and 5.42%
                         returns respectively last month. Turmeric gained on good export demand whiles chana gained
                         on concerns over output. RM Seed gained 4.33% while refined soy oil gained 3.63%. Barley
                         was the biggest loser with 3.87% losses due on declining demand at higher levels. In the guar
                         complex, guar gum lost 3.62% while guar seed declined by 2.87% in May on expectations of
                         higher crop next year while CPO declined by 2.97% on weak overseas markets.
                         Going forward, we expect most agri commodities to trade on a positive note. The delay in
                         the onset of monsoon may lead to delay in the sowing of kharif crops. There may also be
                         crop shifting due to delayed rains. Though the weather forecasters have predicted normal to
                         near-normal monsoon even with weak El-Nino, we may witness below normal sowing if we
                         receive below normal rains. Arrivals of Rabi crops are also in full swing, and will gradually start
                         to decline. However, if the monsoon progresses well after the onset, we may witness good
                         sowing, which may cap sharp gains and may also pressurize prices. Prices may also take cues
                         from the movement in the rupee.

  June 2019                                                 4                                     Commodity ValueGuide
Commodity             FUNDAMENTALS                                                                            Monthly View

    Commodities: Gold rallies sharply on safe demand as risk assets fall
 Macro-economy

    Bonds rally globally on rate cut bets                             Commodity prices in May 2019 (in $)
    Risk assets under pressure as trade war escalates                 Commodity           High           Low Close             Monthly
                                                                                                                              change (%)
    10-year US treasury yields fall sharply as 2% seems
                                                                       Aluminium            1871         1765        1794.5         -0.14%
     inevitable
                                                                       Copper              6461         5804          5830          -9.12%
    Crude oil falls on US supply gut                                  Lead                1967          1733          1805       -6.23%
    ECB’s Draghi: Protectionism and global headwinds                  Nickel            12495          11725         12017         -1.51%
                                                                       Zinc               2845          2504          2524       -10.67%
     weigh on the economy
                                                                       Gold               1311.9         1273        1305.8          1.56%
    ECB: interest rates to stay at current levels through first       Silver             15.04         14.26        14.567        -2.78%
     half of 2020                                                      Crude oil             65            53          53.5       -16.41%
    US trade deficit smaller in April; trade gap with China           Natural gas           2.7         2.44          2.45       -4.85%
     increases                                                         Source- Bloomberg

    Trump: China’s trade tariff decisions to come in the next
     two weeks
    Bank of Japan stimulus bets climb
                                                                       Monthly change in DOE crude and fuel stocks (May 2019)
    Trump: “Not enough progress in talks with Mexico”
                                                                                             Crude oil Distillate Gasoline Cushing stocks
    US ISM non-manufacturing datum better than forecast               Change in (kbls)          5900       -900      4200          2403
    US ISM manufacturing fell to 52.1 in May from 52.80 in            31/5/2019              476500     124800     230900         49053
     April                                                             Change in (%)            1.25%     -0.72%      1.85%         5.15%
                                                                       Refinery utilisation rate was 89.2 % on 26/04/2019
    US ISM manufacturing: Weakest expansion since                     30/4/2019              470600     125700     226700         46650
     October 2016                                                      Source- Bloomberg
    US factory gauge falls to the lowest level in Trump’s
     era
    Euro-zone manufacturing PMI at 47.70 in May; fourth
                                                                       Monthly change in SHFE stocks May 2019
     consecutive month of contraction                                                     Copper     Lead     Zinc    Nickel Aluminium
    Euro-zone services PMI increased to 52.90 in May from             Change (in tonne)  -95673 -6220 -50453            -984  -227637
     52.80 in April                                                    31/5/2019         1,65,739 30,682    59,351      9,938  5,07,353
                                                                       Change (in %)     -36.60% -16.86% -45.95%       -9.01%   -30.97%
    China Caixin manufacturing PMI unchanged at 50.80 in
                                                                       30/4/2019          2,61,412 36,902 1,09,804    10,922   7,34,990
     May; market consensus 50.20                                       Source- Bloomberg
    2019 turning to be the worst year for the world trade on
     trade wars
    IMF pares down China’s growth rate by 10 bps to 6.2%
                                                                       Monthly change in LME stocks (May 2019)
     in 2019 and 6% in 2020 on trade concerns
                                                                                         Copper      Lead     Zinc   Nickel Aluminium
    China issues travel advisory on the US for its citizens           Change (in tonne)   -17175   -4750   19475   -14664       80375
     through 2019                                                      31/5/2019         212000   69700 100800     158604      1155025
                                                                       Change (in %)      -7.49%  -6.38% 23.95%     -8.46%        7.48%
    Euro-zone concerned with Italy’s budget deficit
                                                                       30/4/2019         229175    74450    81325  173268     1074650
    Gold rallies on safe haven demand                                 Source- Bloomberg
    The US ADP data showed employers added merely
     27K jobs in May

June 2019                                                          5                                         Commodity ValueGuide
Monthly View                                                                       Commodity            FUNDAMENTALS

Energy: Fear of recession halts crude rally                         Middle East tensions and the ongoing OPEC-led crude
   WTI fell 17% in May                                             output cut deal; prices remained lull during the week. U.S.
                                                                    production keeps putting downward pressure on price. WTI
   Biggest monthly fall for the year
                                                                    support remains at $50 and resistance remains at $57/b. At
   Oil retreats from a 4 year high                                 MCX Crude is expected to trade in the range of Rs.3400 –
   WTI Brent spread thinnest for the year                          Rs.3800/- per barrel for the month.
   Domestic US Crude reserves swell 8.4%
   OPEC production dips further : Survey                           Natural Gas- CMP - Rs. 162 (MCX June Contract)
   OPEC compliance @ 145% in March                                 Natural gas prices fell around 5% on rising inventories in
   Sanctions hit Iran production and exports                       the US. The prices are hovering around a 3-year low. The
   OECD warns of slowdown ,                                        US inventories have risen for the 10th straight week as the
                                                                    shale basin production surged.
   US production jumps to 12.3 mbpd
                                                                    Overall inventories are still around 10% lower from 5-year
   Natural gas prices drop to 3-year low on bulging
                                                                    average and last year’s level for this period of the year,
    stockpiles
                                                                    which is a bullish sign for the counter in medium term.
   Natural gas prices falling globally
                                                                    Weather is not proving to be of much support to the counter
                                                                    as strong demand for power generation is still missing.
WTI Crude oil- CMP - $53                                             Higher LNG and pipeline exports and inventory situation
The Nymex crude oil settled lowest in six months to end             are positive for the counter in long term, though we see
May month at $53.5 per barrel. WTI crude posted a loss of           further downside in near-term.
8.7% for the week and ended the month over 16% lower-               The counter is expected to trade between Rs 140 and Rs
than the first monthly loss of the year.                            170 in near-term with a downward bias.
The early survey for May month production from Reuters
shows, OPEC’s oil production dropped to a 2015 low of
                                                                    Bullion- Gold out of shackles as recessionary fear on rise
30.17 million bpd in May, as a major 200,000-bpd increase
in Saudi Arabia’s production was unable to offset an even              Gold settle positive during May,
larger production decline in Iran after the U.S. removed               Gold premiums surges in China
all sanction waivers for Iranian buyers. Iran’s oil supply             Gold demand fades in India
dropped by 400,000 bpd month on month, while Venezuela                 US T –bill yields fell
saw another 50,000-bpd decline amid the U.S. sanctions
                                                                       Indian gold demand up 5%,
and continuously plummeting oil production in a severe
economic crisis. OPEC alliance Russia’s output fell to 11.11           Central banks gold reserves jumps
million barrels per day (bpd) in May, down from 11.23 million          PBOC added gold
bpd in April. The Organization for Economic Co-operation               Dollar Index hits 23 months high
and Development expects world GDP growth to slow from
                                                                       Nyrstar halts silver production at world’s third largest
3.5% last year to 3.2% this year, before picking up slightly
                                                                        silver refinery following a damage to the blast furnace
to 3.4% next year. Trade tensions are the principal factor
threatening the global economy.                                        Silver plays catch up with gold rally though it continues
                                                                        to lag
We expect prices of crude oil to remain under pressure
amid a slowdown of global economy due to US-China
inflicted trade wars hampering rest of the world. While             Gold- CMP - $1325 (spot)
Saudi Arabia starts to pump higher oil, US production has           Gold at Comex turned rose 2% during May to settle at to
jumped significantly in last 6 months. The fears of a global        settle at $1,311.0 an ounce, after 3 months of consecutive
recession are now mounting as Trump plans to throw every            loses. Gold prices rose on last trading session of May
nation under its tariff radar and puts the global growth            to their highest in more than two months as heightened
outlook into question. The disappointing manufacturing              Sino-US trade tensions and Washington’s threat of tariffs
data from China shows contraction, while US indicates a             on Mexico stoked worries of a global recession and drove
possible slowdown in the largest energy market. Despite             investors to seek refuge in safe-haven bullion.

June 2019                                                       6                                      Commodity ValueGuide
Commodity            FUNDAMENTALS                                                                        Monthly View

Gold demand stayed strong in China during May as the                   China’s unwrought copper fell 25% M-o-M
premiums over official buying prices stayed in range                   LME Zinc premiums surges to $161/ton
of $10-14 per ounce. Weak Yuan and lower gold import
                                                                       Shanghai copper inventories fell 36%
volumes also pushed premiums higher. Net gold imports
via the main conduit Hong Kong rose 20.5% in April from                Shanghai zinc inventories fell 46%
a month ago but were down about 17% on year in the first               US Auto sales drops 2.3% April
four months.
Gold has been struggling to make headway this year                  China’s latest stimulus package is feeding through to a
even as global tensions picked up, losing out as investors          flagging manufacturing sector.
preferred the haven of US Treasuries, with yields on 10-            The LME’s index of six major industrial metals index plunged
year notes at a 20-month low. The two years note yield              5 percent in May and recorded a 10 percent decline in 3
plunged 13.6 basis points to 1.937% to mark its biggest daily       months. Zinc and copper remain the major contributor for
drop in a year. Falling yields were the reasons for investors       the metal index fall. The trade war is getting international.
to switch to gold as an alternative investment demand at            Lead tanked the most on global auto demand concerns,
times of economic stress.                                           while zinc was offset by outperforming all the metals amid
Another supportive factor for gold is the potential for an US       tight supply and sharp declining inventories. The ongoing
rate cut. The Federal Reserve is prepared to ease if it sees        trade negotiation talks between US-China is driving the
mounting risks to the expansion, in our view; gold appears          metal prices on optimism
to be consolidating around the $1,265 level. A close above
$1325 would is a bullish signal while a close below $1300
                                                                    Zinc - CMP - Rs. 204 (MCX June)
would be bearish, at MCX gold prices to follow international
gold prices and it looks to trade in the broader range of           Global zinc prices remain the biggest loser among metals
31000-32800.                                                        during May, dropping to a six-month low in Shanghai and
                                                                    four- month lows in London, as the global outlook for
                                                                    manufacturing deteriorates.
Silver- CMP - $14.90 (spot)
                                                                    LME Zinc fell $300 or 10% during May months to settle at 4
Silver has been trading mostly like an industrial commodity,        months lows of $2524 a ton in London. As the manufacturing
thus it is not surprising that the white metal fell nearly 3%       and infra structure activities hit a rough patch in China after
in May, while gold rallied nearly 2%. Gold-silver ratio has         US-China broke out of the trade negotiations in May.
become completely skewed in favour of gold on safe and
                                                                    Global zinc market returned to a deficit of 40000 tons in
gold ETF inflows dynamics. The ratio stands over 90 – a
                                                                    March from a small surplus in February. Global refined zinc
ratio not seen since 1923.
                                                                    output was 1.088m tons in March, compared with usage of
US silver exports to India have rocketed to record highs            1.132m tons. But actual production in China fell 4.4% in the
in the past six months. Metals Focus Consultancy sees a             first four months of the year while global production slipped
stronger silver demand in India in 2019.                            by about 3% in the first two months. Chinese Refined zinc
The metal can see a violent rally on short covering as the          imports came in at 77,584 tonnes, the highest monthly
net speculative short position is at its highest level since        import number since December.
November.                                                           The availability of metals in physical markets remained tight,
We see silver trading between $14.50 and $15.50 and                 which drove the LME premiums over cash to $161per tone,
suggest buying on dips as the metal is slowly gaining               its highest level since 1997. The warehouses continues
investors’ attention on escalating trade wars.                      to remain tight as the Zinc prices were by the physical
                                                                    premiums, which surged to $134 per ton highest since 1997
Base metals- Trade wars escalation dents metals demand              at LME, indicating near term tightness.

   Zinc plunged 10%,                                               Headline stocks of zinc in LME-registered warehouses
                                                                    rose 24% or 19400 tons, while the inventories fell 45% at
   Chinese Refined zinc imports surges
                                                                    LME. Mine production from Australia and India is expected
   China refined copper imports drop                               to rise in the second half of 2019. Chinese smelters are
   Refined copper output jumps 10%,,                               expected to churn greater amount of refined metals for the
                                                                    same period.

June 2019                                                       7                                       Commodity ValueGuide
Monthly View                                                                      Commodity             FUNDAMENTALS

We believe any correction should be considered a buying             We expect lead prices to remain sideways as the climate
opportunity .Zinc is likely to trade between R s 195 to Rs          for lead metal remained subdued amind escalation of US-
210 per Kg at MCX,                                                  China trade wars. Lead prices at MCX are likely to trade
                                                                    between Rs 145 and Rs 160.
Copper- CMP - Rs. 405 (June)                                        Nyrstar has halted lead production at Port Pirie smelter in
                                                                    Australia.
Benchmark copper prices on the London Metal Exchange,
trading at around $5,850 a tonne, have tumbled nearly 9%
this month.                                                         Nickel- CMP - Rs. 848 (MCX June Contract)
However, disruptions in top producer Chile, political and           Both nickel and aluminium escaped the vicious selloff in
power problems in Zambia and restrictions on scrap imports          the base metals segment in May. The alloying metal fell
into China are expected to weigh on copper supplies in the          only 1.50%.
second half of 2019.                                                The metal continues to get some support from the demand
World copper mine production fell 1.8% through the first two        from the electric vehicle sector, but increasing nickel pig
months of the year and expected to continue for the year.           iron production in Indonesia and China is still putting a lid
Output from Zambia, Peru and Chile is expected to fell this         on the prices. The metal continues to be in deficit which is
year. In Chile, state-run miner Codelco could be facing a           expected to continue into the next year as well.
strike at its giant Chuquicamata mine, one of Peru’s biggest        Rising SHFE inventory is yet another negative factor the
mines, Las Bambas churns out about 400,000 tonnes of                metal prices. LME inventories continue to fall, cancelled
copper a year is facing labour union issues.                        tonnage is sharply coming down though.
We expect copper to perform fairly well in the second               Norilsk Nickel stated that the company is yet to feel the
half of the year. The recent trout of metal is fuelled by the       heat of global trade war.
escalating trade tension between US-China and US against
                                                                    The metal is expected to trade between Rs 800 and Rs
the rest of the world. Chinese central bank is pumping
                                                                    880 in the near-term.
enormously into system to revive the economy. We could
see copper prices making base around $5600 and should
rally to $6100 at LME and MCX could see range of Rs                 Aluminium- CMP - Rs. 143(MCX June Contract)
390/425 kg.                                                         Aluminium bucked the downtrend in the base metals space
                                                                    in May as it closed slightly higher. The inventories at SHFE
                                                                    warehouses have started coming down sharply, which is a
Lead- CMP - Rs. 153 (MCX June)
                                                                    positive for the prices of the metal. The SHFE aluminium
The benchmark LME lead prices fell 6% in May to settle
                                                                    inventories fell over 30% in May, though LME inventories
at $1794 a ton, the metal is down 16% in 3 months and 11
                                                                    were up around 8%.
percent for 2019.
                                                                    Restrained production in China is positive for the metal in
Lead remained the biggest loser among metals year till
                                                                    long term.
date down 11% in 2019. The metal which has its usage in
                                                                    As per the World Bureau of metals statistics (WBMS), the
the auto batteries is hit hard by the trade wars. The auto
                                                                    primary aluminium market was in a deficit of 2k Tonne in
sales in China sank 17.7% in April from a year earlier, the
                                                                    January-March 2019 period as compared with a deficit of
10th straight month of decline amid trade tension with
                                                                    969K tonne for the whole of 2018. The global aluminium
Washington and an economic slowdown. While in US, U.S.
                                                                    production was up 3.3% in January to March 2019 period.
auto sales are expected to be about 16.9 million units in
                                                                    Chinese apparent demand was nearly 7.6% higher in the
2019, a 2.5% fall from 2018,
                                                                    same period over 2018.
Refined lead was in surplus as production was 1.074m tons
                                                                    The metal is expected to trade largely between $1700 and
in March vs usage of 1.064m tons
                                                                    $1850 in near-term. On the MCX, we expect the range of
                                                                    Rs 137 to Rs 150 in near-term.

June 2019                                                       8                                      Commodity ValueGuide
Commodity             FUNDAMENTALS                                                                    Monthly View

Global economic calendar June 2019
Date      Region          Event        Survey   Actual   Prior                                Impact

3-6-19    China Caixin Manufacturing    50      50.2     50.2    The number is better than the government's estimate that
                PMI                                              showed that manufacturing is still in contraction. Expansion
                                                                 as indicated by the number is positive for the industrial
                                                                 commodities, though trade wars limit the upside.

3-6-19      US     ISM-Manufacturing             52.1    52.8    The data trailed the forecast; hence it is negative for the
                   PMI                                           industrial commodities.

3-6-19      UK     Manufacturing PMI   53.2      53.1     55.1   Data topping the forecast is somewhat positive for the UK
                                                                 Pound.

5-6-19    China Caixin Services PMI             52.7     54.4    Service sector slowed down in May in China but still holds
                                                                 above contraction level

5-6-19      US     ADP Non-Farm                  27k     275K    Disappointing datum indicates dismal non-farm payroll report,
                   Employment Change                             and is negative for the US Dollar and positive for gold.

5-6-19      US     ISM Non-                     56.9     55.5    This is a major data as the services constitute nearly two-
                   Manufacturing PMI                             third of the US economy. The data trailed the forecast, hence
                                                                 the overall impact is Dollar bearish. Gold likely to benefit
                                                                 eventually.

6-6-19      US     ECB Press                                     ECB's Draghi ruled out further easing, sees trade issues
                   Conference                                    affecting the economy, inflation seen picking up towards the
                                                                 end of the year.

7-6-19      US     Non-Farm            196K              181K    Going by the ADP data, NFP report is likely to be a dampener
                   Employment Change                             for the US Dollar and positive for bullion prices.

7-6-19      US     Average Hourly      0.20%             0.40% The market participants will be looking both at the non-farm
                   Earnings m-o-m                              payroll figure as well as the earnings data. A robust data
                                                               would be positive for the US dollar and negative for the bullion
                                                               counters. Industrial commodities can initially fall on stronger
                                                               dollar.

7-6-19      US     Unemployment Rate   3.80%             3.80% The market participants would be looking forward to all the
                                                               details and figures in the NFP report. Lower rate will be positive
                                                               for the US Dollar and negative for the bullion counters.

10-6-19     UK     GDP m/m                                       Disappointing GDP number will put pressure on UK Pound and
                                                                 industrials. The country is facing leadership issues amid Brexit
                                                                 chaos.

10-6-19     UK     Manufacturing                                 Bearish data would be negative for the industrial commodities
                   Production m/m                                and the UK Pound.

June 2019                                                    9                                         Commodity ValueGuide
Monthly View                                                                        Commodity               FUNDAMENTALS

Date      Region          Event          Survey   Actual   Prior                                  Impact

11-6-19     US     PPI m-o-m             0.20%             0.00% If the data turns out to be better-than-forecast, it will be deemed
                                                                 positive for the US dollar as it will decrease the possibility of
                                                                 an immediate rate cut in the US. In that case, commodities can
                                                                 fall. As such the US Fed sees slower inflation rise, and has
                                                                 indicated rate cuts due to negative impact of trade concerns.

12-6-19     US     CPI m/m                                          Commodities can fall on better than expected number. As such,
                                                                    the US Fed sees slower inflation rise, and has indicated rate
                                                                    cuts due to negative impact of trade concerns.

13-6-19   China Trade Balance                                       Increasing US trade deficit will be deemed somewhat negative
                                                                    for the base metals and other commodities as it would stoke
                                                                    the fear of escalating trade tensions.

14-6-19   China Industrial Production                               Slowing down China's economy is a great concern for the
                y/y                                                 industrial commodities. Disappointing numbers will be bearish
                                                                    for the industrials. Jan number was disappointing.

14-6-19   China Fixed Asset                                         Data topping the forecast would be positive for the base metals
                Investment ytd/y                                    and energy counters; however Jan figure was disappointing.

14-6-19     US     Retail Sales m/m                                 A ket economic indicator. A positive surprise will boost the US
                                                                    Dollar. Bullions will fall.

14-6-19     US     Prelim UoM                                       It is a leading indicator of consumer spending; a higher reading
                   Consumer Sentiment                               is considered positive for the economy as a rise in the consumer
                                                                    confidence is directly correlated with the consumer spending
                                                                    to a great extent. A robust figure will be negative for the bullion
                                                                    counters.

18-6-19     Ger    German ZEW                                       Better-than-expected data will be positive for the euro. Of
                   Economic Sentiment                               late, European economic indicators have turned somewhat
                                                                    promising.

19-6-19     US     "                                                A dovish Fed will be negative for the US Dollar, and gold will
                   FOMC Economic                                    rally. The Fed is increasingly becoming concerned with the
                   Projections/                                     global trade wars affecting the US economy.
                   Statement "

20-6-19     US     Philly Fed                                       A key indicator of manufacturing health. Data topping the
                   Manufacturing Index                              forecast would be positive for the US Dollar and negative for
                                                                    the bullions.

21-6-19     Eur    Flash Manufacturing                              The manufacturing activity continues to be in contraction, thus
                   PMI                                              number trailing the forecast will be bearish for the Euro.

25-6-19     US     CB Consumer                                      Higher consumer confidence bodes well for the US economy,
                   Confidence                                       so the US Dollar will rise and bullions will fall.

26-6-19     US     Durable Goods         -1.80%            0.30% Better than expected number will be positive for the US Dollar
                   Orders m/m                                    and the industrial commodities. Bullions will fall.

June 2019                                                      10                                          Commodity ValueGuide
Commodity             FUNDAMENTALS                                                                       Monthly View

Date      Region          Event           Survey   Actual   Prior                               Impact

27-6-19     US     Final GDP q/q                                    The US economy is still doing well, though inventories
                                                                    contributed the major part of the growth in the last data. A
                                                                    negative surprise will increase the chances of a rate cut, which
                                                                    will be positive for precious metals and negative for the US
                                                                    Dollar.

28-6-19     US     Core PCE Price Index                             A key gauge of inflation. Data better than forecast would be
                   m/m                                              negative for the bullions and other commodities as well.

28-6-19     US     Personal Spending                                A key indicator of the economy. Data trailing the forecast would
                   m/m                                              be negative for the US Dollar and positive for the bullions.

28-6-19     US     Core PCE Price Index                             Preferred gauge of the US Fed. A higher inflation reading will
                   m/m                                              be negative for the bullion counters.

30-6-19   China Manufacturing PMI                                   It's the broadest measure of economic activity and the primary
                                                                    gauge of the economy's health. Beleaguered China's economy
                                                                    might see improvements on tax cuts and other stimulus taken
                                                                    of late. A positive surprise will boost the industrials.

June 2019                                                      11                                        Commodity ValueGuide
Monthly View                                                                                                          Commodity                                                              FUNDAMENTALS

 Agri Ministry forecasts 2018-19 food grain output at 283.37 million tonne
Key points-
 Third Advance Estimates projects record rice, wheat output
    for 2018-19
                                                                           Price performance
 South west monsoon advances further into Arabian Sea
                                                                           Commodity Exchange Expiry 31-May 19                                                                                    30-Apr 19 Change %
 SEBI allows portfolio managers to participate in exchange
                                                                           Barley        NCDEX June         1814                                                                                        1887    (3.87)
    traded commodity derivatives
                                                                           Castor        NCDEX June       5702                                                                                         5684      0.32
 SEBI allows mutual funds to invest in exchange traded
                                                                           Chana         NCDEX June         4611                                                                                        4374     5.42
    commodity derivatives
                                                                           Cotton         MCX  June      22010                                                                                       22660      (2.87)
 Government raises 2018-19 total spices output to 86.12 lakh
                                                                           Cocud         NCDEX June     2753.5                                                                                          2513      9.57
    tonne
                                                                           CPO            MCX  June       519.3                                                                                        535.2    (2.97)
 IMD maintains its normal monsoon forecast at 96% of LPA
                                                                           Dhaniya       NCDEX June       7355                                                                                          7281      1.02
 China puts purchases of US soybean on hold as trade war                  Guargum       NCDEX June       8504                                                                                         8823     (3.62)
    intensifies                                                            Guarseed      NCDEX June     4265.5                                                                                       4391.5     (2.87)
 Castor oil exports take a hit due to US-China trade war                  Jeera         NCDEX June       17410                                                                                       17035      2.20
 SEA urges government to allow bulk export of mustard oil                 Maize         NCDEX June        1889                                                                                         1849      2.16
 Centre asks tariff commission to come up with actual cost of             Mentha Oil     MCX  June      1291.6                                                                                       1269.7       1.72
    production of sugar for 2018-19                                        Ref Soy Oil   NCDEX June      755.3                                                                                       728.85       3.63
 Government aims to curb unauthorized import of edible oils               RM Seed       NCDEX June       3949                                                                                          3785      4.33
    coming via Nepal                                                       Soybean       NCDEX June       3698                                                                                          3715    (0.46)
 Government may raise pulses import quota for processors on               Turmeric      NCDEX June       6968                                                                                         6520      6.87
    lower supplies                                                         Wheat         NCDEX June        1965                                                                                         1923      2.18
 Government aims to add 220 more mandis in eNAM in FY20                  Source- NCDEX, Sharekhan Comtrade Research

 Government mulls National Mission to boost vegetable oil
    output
 Government wheat stocks as on May 1 at 331.60 lakh tonne,               Monthly performance (change in %)
    down 6.2% y-o-y                                                        12.00
 Government likely to miss wheat procurement target as                    10.00
                                                                                     9.57

    slowing purchases in MP and UP                                          8.00             6.87
 US boosts tariffs on $200 billion in goods from China to 25%              6.00                        5.42
                                                                                                                4.33
 Farmers may switch to soybean from maize and cotton due to                4.00
                                                                                                                          3.63
                                                                                                                                        2.20 2.18 2.16
    uncertainty over monsoon                                                2.00
                                                                                                                                                                 1.72
                                                                                                                                                                              1.02
                                                                                                                                                                                        0.32
 ICEX launches black pepper contract                                       0.00

 Late wheat harvesting delays cotton sowing in north India                (2.00)
                                                                                                                                                                                                 (0.46)

 India vegetable oil imports between November to April up 3%               (4.00)                                                                                                                          (2.87)(2.87)(2.97)
                                                                                                                                                                                                                             (3.62)(3.87)
    to 75.42 lakh tonne                                                    (6.00)
                                                                                                                                                                                        Castor
                                                                                                                                                         Maize

                                                                                                                                                                                                  Soybean

                                                                                                                                                                                                             Cotton

                                                                                                                                                                                                                                 CPO

                                                                                                                                                                                                                                       Guargum
                                                                                                        Chana

                                                                                                                                                 Wheat

                                                                                                                                                                                                                                                 Barley
                                                                                             Turmeric

                                                                                                                                                                              Dhaniya
                                                                                                                          Ref Soy Oil

                                                                                                                                                                                                                      Guarseed
                                                                                     Cocud

                                                                                                                                                                 Mentha Oil
                                                                                                                RM Seed

                                                                                                                                         Jeera

 Global sugar deficit likely to be 2.34 million tonnes in 2019-20
 Sugar exports jump to 21 lakh tonne this year
 Basmati paddy prices down in the absence of clarity on
    payment to Iran export                                                Source- NCDEX, Sharekhan Comtrade Research

 Gujarat halves groundnut output in 2018-19 due to deficit
    rains
 World food prices rise 1.5% in April: FAO
 Oilmeal exports fall 25% in April
 Cotton Association of India cuts output estimate to 315 lakh
    bales
 FCI to sell 10 million tonne of wheat to bulk consumers in
    current fiscal
 India’s FY 19 basmati rice exports hit all-time high of 44.15
    lakh tonne

June 2019                                                            12                                                                                                         Commodity ValueGuide
Commodity         FUNDAMENTALS                                                                         Monthly View

 Cotton seed oilcake                                                 Turmeric prices gained on good demand from stockists.
                                                                     Good demand in the domestic and overseas markets also
Cotton seed oilcake June futures were the biggest
                                                                     supported prices. There was good demand for Indian
gainers in the agri commodity basket on NCDEX in April.
                                                                     turmeric from the overseas markets in the spot. However,
Prices opened at Rs. 2,532/quintal and touched a low of
                                                                     expectations of good output this year capped sharp gains.
Rs. 2,513.50/quintal in the beginning of the month. Prices
gained sharply during the month and touched a new                    We expect turmeric to trade mixed to positive this month.
all-time high of Rs. 2,807/quintal towards the end of the            Good demand from the domestic and overseas markets
month. Prices closed 9.57% higher on a monthly basis at              may continue to support prices. However, good arrivals
Rs 2,753.50/quintal compared to previous month’s close of            of the new season crop may cap the upside and also
Rs. 2,513/quintal.                                                   pressurize prices at higher levels.

Cotton seed oil cake prices traded on a bullish note last            Currently the May futures are trading around Rs. 6,968/
month. Prices gained sharply on account of robust demand             quintal. Prices may find strong support around Rs 6,680-
amid tight supplies. Lower cotton output this year lead to           6,460/quintal while resistance may be seen around Rs
lower cotton seed availability for crushing, leading to lower        7,100-7,360/quintal.
cotton seed oilcake production. Demand also picked up
due to lower cattle feed availability and poor monsoon last           Barley
year. However, declining global cotton prices capped sharp
                                                                     Barley June futures were the biggest losers in the agri
gains.
                                                                     commodity basket on NCDEX in May. Prices opened
We expect cotton seed oilcake to continue to trade higher.           the month at Rs 1,900/quintal and touched a high of Rs.
Lower supplies and good demand from the feed industry                1,935/quintal in the first half of the month. Prices declined
may continue to support prices. Expectations of delay in the         significantly during the month and touched a low of Rs.
onset of monsoon may also support prices. However, prices            1,810/quintal towards the end of the month. Prices closed
are at all time highs, and thus, traders may liquidate their         3.87% lower month-on-month at Rs 1,814/quintal compared
stocks to generate liquidity ahead of the commencement               to previous month’s close of Rs 1,887/quintal.
of kharif sowing.
                                                                     Barley prices were trading on a positive note over the past
Currently the June futures are trading around Rs. 2,753.50/          couple of months on account of good demand from the
quintal. Prices may find strong support around Rs 2,650-             breweries ahead of the summer season. Prices topped out
2,480/quintal while resistance may be seen around Rs                 in the early part of May as demand peaked and thereafter
2,880-3,000/quintal.                                                 we witnessed a fall in the prices. easing demand at higher
                                                                     levels, higher output expectations and higher supplies at
 Turmeric                                                            higher prices put pressure on the prices.

Turmeric June futures were the second biggest gainers in             We expect barley to trade mixed to negative. Declining
the agri commodity basket on NCDEX in May. Prices opened             demand from the breweries may pressurize prices.
at Rs. 6,544/quintal and touched a low of Rs. 6,440/quintal          Expectations of higher output may also keep prices under
in the beginning of the month. Prices gained significantly           pressure. However, any revival in demand may support
during the month and touched a high of Rs. 7,360/quintal in          prices at lower levels.
the second half of the month. Thereafter, prices corrected           Currently the May futures are trading around Rs. 1,814/
from higher levels on profit booking. Prices closed 6.87%            quintal. Prices may find strong support around Rs 1,740-
higher on a monthly basis at Rs 6,968/quintal compared to            1,675/quintal while resistance may be seen around Rs
the previous month’s close of Rs. 6,520/quintal.                     1,885-1,935/quintal.

June 2019                                                       13                                         Commodity ValueGuide
Trend & View                                                                              Commodity        TECHNICALS

 Gold: Positive bias
MCX Gold prices, which dropped from their high from Rs.
34,000 found support near Rs. 31,500 levels. Since the
past ten weeks, a sideways action has been seen which
can also be termed as a consolidation. This occurs usually
to digest the previous fall.
As far as prices persist at Rs. 31500-32500, no trending
move is expected. Any move above Rs. 32300 will open
positive possibilities as prices are moving in a higher highs
and higher lows formation. However, a failure to protect the
level of Rs. 31500 will infuse selling pressure.
The weekly relative strength indicator (RSI) is changing
direction from negative to positive and has also entered
the positive terrain above Rs. 50.                                        Source- Telequote

View      CMP        Commodity    Reversal            Target
Up      Rs. 32,100     Gold      Rs. 31,500         Rs. 33,000

 Nickel: Trending positive
MCX Nickel has given a bullish break in a falling channel
breakout, thus opening positive possibilities. Moreover, the
counter is also trading above its upward sloping trendline,
giving an indication that the trend is positive.
As far as prices are trading above Rs. 830 levels, the bias is
positive as it can move near till Rs. 930 levels. The weekly
RSI is positively poised as it is near the center line (50).

                                                                          Source- Telequote
View      CMP        Commodity   Reversal             Target
up       Rs. 869       Nickel    Rs. 830         Rs. 930 - Rs. 950

 Turmeric: Change in trend
The above chart shows the price movement of the NCDEX
turmeric weekly contract. Price were making a lower highs
and lower lows pattern. After a sideways consolidation
since the past few weeks, the agro commodity had given
a upward trend line breakout which indicates change in
trend from bearish to bullish.
In the current scenario, prices had broken the previous
week’s low and are hovering near trend line support at
Rs. 6,550 level. Any move above Rs. 7060 can open
possibilities for fresh a upside move till Rs. 7,850 level.
The RSI is above the center line indicates strength in the
counter.

View          CMP       Commodity    Reversal            Target
Up          Rs. 6,950    Turmeric    Rs. 6,400          Rs. 7,850
                                                                          Source- Telequote

June 2019                                                            14                                   Commodity ValueGuide
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