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ICBC Trading Strategies of Precious Metals and Commodities Market-August 17, 2017
 

I. Precious Metals
Gold
Gold rose about 1 percent on Wednesday, shaking off two days of losses, as the dollar edged lower after the release of the minutes from Federal Reserve's July meeting at which policymakers voted unanimously to keep U.S. interest rates unchanged. The readout of the meeting also showed the Fed increasingly ready to begin reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities. In the minutes, policymakers had a lengthy discussion about a recent streak of soft inflation readings. Inflation has remained below the central bank's 2 percent target for more than five years. Federal Reserve policymakers appeared increasingly wary about recent weak inflation and some called for a halt to further interest rate hikes until it was clear the trend was transitory.
The dollar weakened against a basket of currencies after the release of the minutes. U.S. stocks pared gains while prices of U.S. Treasuries were largely unchanged. Spot gold was up 0.8 percent to $1,281.15 per ounce, after rising as much as 1 percent to a session high of $1,283.90.
On technical front, gold recovered yesterday’s losses and regained the ground of $1,280 after Fed’s minutes. Technical indicators show that upward momentum is losing, suggesting rising pressure on bullion. Resistance can still be found at the key mark of $1,300. In case of failed breakthrough, gold is expected to pull back in coming sessions.

Silver
Tracking gold, silver surged 2.8 percent to $17.06 an ounce, holding above its 100- and 200-day moving averages. The MACD index shows lingering upward momentum, suggesting that the white metal will keep testing the support of the aforementioned technical level. In case of failed breakthrough, silver is expected to pull back.

II. Commodities
Crude Oil
Oil prices fell more than 1 percent on Wednesday even though U.S. crude stockpiles declined by the most in a year, as data suggesting domestic production was edging higher stoked worries about the global crude glut. Brent crude futures settled down 53 cents, or about 1 percent, at $50.27 per barrel. U.S. West Texas Intermediate (WTI) crude futures settled at $46.78 a barrel, down 77 cents, or 1.6 percent.
U.S. crude inventories dropped for a seventh consecutive week, falling 8.95 million barrels last week to 466.5 million barrels to their lowest since January 2016, the Energy Information Administration said. Including emergency reserves, crude stocks were at 1.15 billion barrels, the lowest since October 2015. However, gasoline inventories did not decline as expected, and the data also showed that U.S. crude output rose to 9.5 million barrels per day from 9.4 million a week earlier. Rising U.S. output could add to global oversupply that prompted the Organization of the Petroleum Exporting Countries and other oil producers to curtail production to boost prices.

Copper
Copper prices hit their highest since 2014 as rises across most industrial metals triggered pre-set buy orders and a wave of speculative buying. Momentum funds are buying the strength, piling in as the price rises. Forward selling by producers keen to lock in a high price was limiting gains. The rallies had been supported by expectations of strong global demand and tight supplies. Benchmark copper finished 2.4 percent higher at $6,532 having touched $6,576.50, the highest since November 2014. Copper is expected to remain consolidating at highs in the near term.

Soybean
Chicago Board of Trade soybean futures closed firm, with signs of good export demand keying a turnaround. Good weather for crop development cast a shadow on the market, dragging down prices to the lowest since June 29. A delegation of importers from China signed agreements to buy 3.8 million tonnes of U.S. soybeans valued at about $1.56 billion. The U.S. Department of Agriculture will announce is export sales report on Thursday, which is expected at 350,000-850,000 tonnes last week. CBOT November soybeans were 1 cent higher at $9.25-1/4 a bushel.


Dealing Room, ICBC Beijing Branch
Li Nan


(2017-08-17)
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