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ICBC Trading Strategies of Precious Metals and Commodities Market - July 18, 2018

I. Precious Metals

Gold declined 1.1 percent lower at $1,226.91 per ounce, having earlier hit its lowest since last July at $1,225.58. The metal is down more than 5 percent for the year.

Powell offered an upbeat view of the U.S. economy in an appearance before the Senate Banking Committee, with markets expecting two more interest rate increases this year amid a continued economic expansion.

The dollar, in which gold is priced, gained against a basket of currencies during the testimony, making gold more expensive for non-U.S. investors.

The U.S. dollar is expected to rise in coming sessions amid widespread expectations of two more interest rate increases this year, that will keep bullion in check if trade friction did not escalate.

On chart, gold had breached below the trough of last year, and will turn to $1,200 for support in the near term. If the level failed to hold it up, gold is likely to fall as low as $1,150.


Silver fell 0.9 percent to $15.60 an ounce, dipping to $15.51, its lowest since July 2017. Tracking gold, the white metal extended losses, but got lift at $15.50. In the near term, silver will repeatedly test the support of $15.50, and is likely to slip all the way to $15 if the level is crossed below.

II. Commodities
Crude Oil

Crude oil futures steadied on Tuesday as the focus turned to falling inventories in the United States and further output constraints in Venezuela and Libya.

U.S. West Texas Intermediate crude (WTI) settled up 2 cents at $68.08 a barrel. Brent futures rose 32 cents to $72.16 a barrel, after earlier trading as low as $71.35 a barrel, its lowest level since April 17.

Venezuela's four crude upgraders are scheduled to undergo maintenance in the next few weeks. The units have the ability to process a combined 700,000 barrels per day.

The market is seeking clear signals on supply, including whether the United States will release crude from its Strategic Petroleum Reserve and whether Libya's oil production will rebound following military clashes in late June and early July.


Copper prices edged lower on Tuesday, pushed down by a stronger dollar and weaker economic growth in top consumer China. Benchmark copper on the London Metal Exchange (LME) closed 0.7 percent down at $6,152 a tonne, near a one-year low of $6,081 reached on July 11 and down about 16 percent from early June.

Market participants believe that lightly slower growth for the second quarter in China had a bigger impact on copper prices, fearing that demand will be damaged by a global trade war. We maintain our view that copper will remain weak.


U.S. soybean futures firmed on Tuesday. The August soybean contract rose 10 cents to $8.39-1/2 a bushel at Chicago Board of Trade, extending Monday’s gains on technical buying after a slump by 6.7 percent last week.

Chinese buyers have loaded up on soybeans from Brazil, instead of the United States, because of the U.S.-China trade dispute. However, U.S. soybean prices are now looking more competitive with Brazilian soybeans, traders said.

Investors shall closely watch the progress in China-U.S. trade relations. Soybean prices will be kept in check in the near term. The trading volume of CBOT soybeans, soymeal and soyoil is expected at 176,872 lots, 109,845 lots and 86,395 lots respectively.


Dealing Room, ICBC Beijing Branch
                        Cheng Yu