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ICBC Trading Strategies of Precious Metals and Commodities Market - July 17, 2018
 

I. Precious Metals
Gold

Gold steadied on Monday as weak physical demand in top-consuming regions and the expectation of higher U.S. interest rates weigh, despite the bullion-priced U.S. dollar losing steam. Spot gold lost 0.2 percent at $1,239.11 per ounce.

A lower U.S. currency makes dollar-denominated gold cheaper for holders of other currencies, which typically boosts bullion demand. However, low physical demand in top gold-consuming countries China and India and the continued expectation of the U.S. Federal Reserve to raise interest rates pressured bullion.

India's gold imports fell for a sixth month in June to 44 tonnes as a drop in the rupee lifted local prices to their highest in nearly 21 months, curtailing demand.

Meanwhile, holdings for the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust , have fallen more than 8 percent since late April to less than 26 million ounces, showing fading investor interest in bullion. Gold prices are expected to remain subdued in the near term.

Silver
Silver lost 0.1 percent at $15.77 per ounce. A firmer dollar kept the white metal in check.

On chart, silver had slipped to the lower bank of recent trading range at around $15.70, a level touched many times before. In January, June and February of 2017, silver hit $15.50 before recovering, suggesting strong support at this level. Without sharp losses in bullion, it is expected to regain ground gradually.

II. Commodities
Crude Oil

Oil prices slumped more than 4 percent on Monday, with Brent reaching a three-month low, as Libyan ports reopened and traders eyed potential supply increases by Russia and other producers.

Brent crude futures fell $3.49 to settle at $71.84 a barrel, a 4.63 percent loss, while U.S. West Texas Intermediate (WTI) crude futures fell $2.95 to settle at $68.06 a barrel, a 4.15 percent loss.

Russia and other oil producers could raise output by 1 million barrels per day (bpd) or more if shortages hit the market, Russian Energy Minister Alexander Novak told reporters on Friday. Also weighing on futures were reports the United States could tap its Strategic Petroleum Reserve, which would add supply to the market. Oil prices are expected to keep falling in the near term due to the ongoing trade wars.

Copper
Copper eased along with most other metals in London on Monday after data showed that China's economy expanded at a slower pace in the second quarter, pointing to weaker demand. Benchmark copper edged down 0.7 percent to $6,192 per tonne on the kerb, hovering near one-year lows. Prices are down about 14 percent in 2018.

Economic activity in the world's top consumer of metals was hobbled by efforts to contain debt, while June factory output growth weakened to a two-year low as a trade war with the United States intensified.

Soybean

U.S. soybean futures jumped on Monday after dropping to their lowest prices earlier in the session, as the U.S.-China trade dispute looms over agricultural markets. The August contract slipped to $8.10-1/2 a bushel, the weakest price for a front-month contract since December 2008, before rising to $8.29-1/2, up 10-3/4 cents after a slump by 6.7 percent last week.

Investors shall closely watch the progress in China-U.S. trade relations. Soybean prices will be kept in check in the near term. against the background of trade wars.

 

Dealing Room, ICBC Beijing Branch
                        Cheng Yu


(2018-07-17)
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