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ICBC Trading Strategies of Precious Metals and Commodities Market - August 24, 2018
 

I. Precious Metals
Gold

Gold prices slid on Thursday, after it failed to confirm its brief break on Wednesday through $1,200 an ounce, a key psychological level, as the dollar resumed its ascent a day later.

The dollar index rebounded to 95.50, moving off the 50-day moving average of 95. With the dollar stronger again, precious metals priced in the currency slid. Spot gold declined 0.7 percent to $1,187.30 per ounce. Prices hit their highest since Aug. 13 at $1,201.51 in the previous session.

The Fed's latest policy meeting minutes suggested it is on course to raise interest rates further after two hikes this year, denting demand for non-interest-yielding gold. Meanwhile, trade tariffs imposed by the United States and China on each other kicked in on Thursday, benefiting the safe-haven U.S. Currency. Markets are awaiting Fed Chairman Jerome Powell's comments on Friday at the central bank's annual meeting in Jackson Hole, Wyoming for any change in its interest rate stance.

After failing to confirm its brief break through $1,200 an ounce, sentiment remained bearish without effective reversion. Gold prices will be determined by the dollar.

Silver

Spot silver dropped 1.2 percent to $14.56 an ounce, touching $14.49, a one-week low. The white metal failed to track gold’s gains, but posted sharper losses when bullion declined, showing subdued risk appetite. Safe-haven sentiment in the near term will be a major drag on silver prices. Market bulls are recommended to square their positions.

II. Commodities
Crude Oil

Oil prices steadied on Thursday as the escalating trade war between the United States and China weighed on demand expectations a day after prices jumped on a big draw in U.S. crude inventories. Brent crude oil settled down 5 cents at $74.73 a barrel. U.S. light crude was 3 cents lower at $67.83 a barrel.

The world's three top producers - Russia, the United States and Saudi Arabia - now all pump around 11 million bpd, meeting a third of global demand. Technically, crude oil are standing on the crossroad. Prices are expected to fall back to around the 200-day moving average if demand dwindled sharply.

Copper

Copper prices fell on Thursday. Benchmark copper ended down 0.3 percent at $5,986.5 a tonne, heading towards the 14-month low of $5,773 a tonne hit last week. Earlier this week it touched a one-week high at $6,076 a tonne. A rising U.S. currency makes dollar-denominated commodities more expensive for non-U.S. firms, which could potentially subdue demand.

The U.S. central bank is expected to raise rates twice more this year and twice next year. The escalated trade dispute between the United States and China also capped its gains. We maintained our bearish view.

Soybean

U.S. soybean futures sagged on Thursday. CBOT November soybeans ended down 16-1/4 cents at $8.54 a bushel.

Additional pressure in CBOT soybean futures stemmed from worries about trade with top global soy buyer China as a new round of tariffs kicked in. The United States and China implemented punitive 25-percent tariffs on $16 billion worth of each other's goods, a move that will reduce demand for U.S. soy.

The trading volume of CBOT soybean, soymeal and soyoil is expected at 168,076 lots, 139,657 lots and 72,690 lots respectively.

 

Dealing Room, ICBC Beijing Branch
                        Cheng Yu


(2018-08-24)
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