Commodities Weekly: Copper nears 15-month low as fresh tariffs announced

The commodity space has generally struggled today amid escalations in the US-China trade war. US President Trump announced a 10% levy on Chinese imports from September 24, rising to 25% next year.  China has said it will decide today how to retaliate.

 

Base metals

COPPER fell as much as 2.3% this morning after US President Trump announced the next phase of tariffs on Chinese imports. The industrial metal edged down to 2.5605, approaching the August 15 low of 2.5393, which was the lowest since June 2017. Concerns about an escalation and prolongation of the US-China trade war and its possible impact on global growth are among the reasons for the pressure.

 

Precious metals

GOLD has potential to have its first up-week in four, despite the uptick in the US dollar after the fresh tariffs were announced. The metal is currently at 1,199.33, up 0.5% so far this week, and may be attempting a test of the 55-day moving average, which is currently at 1,213.28. That moving average has capped gold prices since April 25.

 

Gold Daily Chart

Source: Oanda fxTrade

 

Speculative accounts reduced their net short exposure by 5,907 contracts in the week to September 11, according to the latest CFTC data. Bloomberg reports that gold holdings by Exchange Traded Funds shrank for the 17th straight week while those of the largest ETF fund, SPDR Gold Holdings, have fallen to their lowest since 2016.

 

SILVER is struggling to match the rebound gold has seen and is stuck close to the 30-month lows struck earlier this month. The gold/silver (Mint) ratio is holding near 10-year highs at 84.847, confirming silver’s struggles.

Speculative accounts reduced their net short positions in silver for the first week in six, according to CFTC data as at September 11. The nearest support point is probably the September 11 low of 13.9445 while resistance is possible at the August 28 high of 14.9993 and the 55-day moving average at 15.0598.

 

PLATINUM remains capped by the 55-day moving average, which has held on a closing basis since February 28. The metal is currently at 799.04 with the 55-day moving average at 811.63. Speculative net short positioning was reduced to 7,568 contracts, the smallest in nine weeks, according to CFTC data as at September 11.

 

PALLADIUM continues to benefit from the gradual shift from diesel-powered cars to gasoline-powered in the EU. Petrol-driven autos require catalytic converters, which use small amounts of palladium, and Bloomberg estimates that as much as 84% of 2018 consumption will be used in this area. This contrasts with the decline of platinum which is used more in diesel engines. The better outlook for palladium is reflected in speculative positioning, where accounts are net long and increased those longs to the highest in two months, according to latest data to September 11. The precious metal is now at 986.750, testing the 200-day moving average at 988.66.

 

 

Energy

CRUDE OIL prices have been pressured by the clouded demand outlook when faced with the escalating tariff war,  while the supply outlook also remains uncertain, with Iran sanctions due to kick in from November 4. WTI is slowly moving into the apex of a triangle pattern, which has been forming since the near-term peak on July 3. The breakout points today would be either $71.00 to the upside or $68.33 to the downside. WTI is currently trading at $68.724.

 

WTI Daily Chart

Source: Oanda fxTrade

 

Brent crude peaked at $79.944 on September 12 and there is growing market chatter that OPEC members may be attempting to keep it neat $80 per barrel through to the US mid-term elections in November. The spread between Brent and WTI has narrowed to about 8.8 points from above 10 points last week.

 

NATURAL GAS is set for its second day of gains, though faces some tough technical resistance obstacles to overcome. Rising 0.3% today to 2.828, gas has three moving averages just above. The 200-day is at 2.8376, 55-day at 2.8455 and 100-day at 2.8590. The last time natural gas traded above all three moving averages was on September 12.

A German government spokesperson said yesterday that Germany’s gas market is open to all market participants. Currently Russia supplies 60% of German gas imports and there is speculation the US companies expect to start delivering liquefied natural gas to Germany within four years, even though it would cost more than Russian gas.

 

 

Agriculturals

The weather continues to play havoc with WHEAT supply chains as Australia contends with both droughts and cold snaps in various wheat-growing regions, with frost reported in the southern areas of Western Australia. Compensating somewhat for potential shortfalls in supply, Russia’s wheat exports are 48% higher this season than the previous one, according to data as at September 13 supplied by the Russian Agriculture Ministry. In contrast, the US revealed that its exports were down 10% y/y as at September 6.

Wheat continues to shy away from support at the 200-day moving average, which is at 4.7220 today, and has done since March 29. The commodity touched a two-month low of 4.739 on September 13 and has enjoyed a 3% bounce since then.

 

CORN took a tumble last week after the US Department of Agriculture boosted its forecasts for domestic production and stockpiles, even though farmers were planting less acreage as the yield per acre hit an all-time high.  Corn had its biggest one-day fall since June 19 on September 12, the day the report was released. The commodity is now at 3.346 after touching 3.339 earlier today, the lowest since July 17.

 

SUGAR has given back more than 50% of its August 22 to September 13 rally in the first two days of this week, and has broken back below the 55-day moving average at 0.1072. Sugar is currently trading at 0.10663.

The decline comes as news emerges that typhoon Mangkhut passed by most of China’s sugarcane growing area in the Guangdong province, and did not cause as much damage to the crop as initially feared. Guangdong province produces about one million tonnes of sugar each year, about 10% of the country’s output.

 

Sugar Daily Chart

Source: Oanda fxTrade

 

SOYBEAN prices continue to be pressured by the US-China trade war with prices touching a two-month low this morning. Soybeans fell to 8.112, the lowest since July 16, and is facing its fourth down day in a row. The commodity is now at 8.155.

The drop comes even as news emerged of a potential supply disruption from China, where the top-growing region was hit by a frosty spell from September 9 to 10. This could cut output from the region by 4.5%, or 275,000 tons.

Commodities Weekly: Gold short bets at highest in 17 years

The dollar’s resurgence on safe haven buying after more Trump rhetoric on tariffs and firmer US yields on the back of a strong US jobs report is taking its toll on most precious metals. Copper and oil are struggling from an uncertain demand outlook while the agricultural sector is caught up with supply issues.

 

Precious metals

Net short GOLD positions held by speculative accounts are at their highest since December 2001, according to the latest data published by CFTC as at September 4. During that week, net short positions increased by 10,434 contracts from a combination of a reduction in outright longs and an increase in outright shorts.

Gold has been confined to a 1,190.15 – 1,207.10 range over the last week and is set for its third daily loss today as the US dollar’s bid tone is reignited on concerns of a further escalation in the US-China tariff war. Immediate support may be found at the August 24 low of 1,183.15 accompanied by the 18-month low of 1,160.21. The 55-day moving average continues to cap the upside

 

Daily Gold Chart

Source: Oanda fxTrade

 

SILVER also continues to be at the mercy of the rising dollar, though has managed to hold above the psychological 14.00 level for the past week. Indeed, silver has traded above the 14.00 level since January 2016. Speculative net short positioning is at its highest since data started being recorded in 1993, latest CFTC data shows.

The gold/silver (Mint) ratio is trading near its highest levels since October 2008. The ratio hit 85.206 last Friday and is currently at 84.398.

 

Net speculative short positions in PLATINUM are at their highest since data began in 1993. Accounts are net short 11,916 contracts as at September 4, that’s an increase of 940 contracts on the week. Prices have been relatively stable over the past week, consolidating above the near 10-year low struck mid-August. The commodity is currently trading at 786.799.

 

PALLADIUM has been testing resistance at the 200-day moving average of 989.182 for the past week and, so far, has been unable to breach it convincingly. In contrasts to the other precious metals, speculative net positioning is long, and traders added to long positions for the second straight week to September 4, latest CFTC data shows.

 

Palladium Daily Chart

Source: Oanda fxTrade

 

Base metals

 

COPPER prices remain depressed amid demand concerns as the US-China tariff war appears to be escalating. Trump’s Friday comment that he would be willing to slap tariffs on almost all Chinese imports, threatening duties on $267 billion of goods over and above planned tariffs on $200 billion of Chinese products, has ensured copper will struggle to rebound from the near 15-month lows amid global growth concerns. Estimates suggest that an expansion to cover almost all Chinese imports would knock 1% off Chinese copper demand since a number of copper-intensive goods would be included in the extended list, Reuters reports.

 

Energy

 

The hurricane-induced rally in CRUDE OIL is being dialed back after the tropical storm came to naught. Only today is WTI poised to snap a five-day losing streak from the near-term peak at 71.782, with gains of just 0.08%.

American producers are reportedly seeking buyers for crude supplies which would normally have been headed to China. This has caused the WTI/Brent spread to widen out to almost $10 per barrel, the widest since June.

 

NATURAL GAS inventories are expected to be scaled back when the latest EIA data is released on Thursday. Estimates forecast a reduction to 50 billion cubic meters from 63 billion the previous week. Moderating weather could reduce the fuel’s demand in the near-term but the broader shift toward cleaner burning fuels should keep prices supported in the longer term. Gas is currently trading at 2.820 having rallied 2.2% from yesterday’s low of 2.759, which in turn was the lowest in six weeks.

 

 

Agriculturals

 

US SOYBEAN growers are poised to harvest their largest ever crop even as stockpiles of the commodity are surging. Recent estimates suggest stocks are 40% above the previous record set a decade ago, according to Bloomberg. Markets will be on the alert for the USDA’s WASDE (World Agricultural Supply and Demand Estimates) report scheduled for release tomorrow, September 12.

Soybean Stockpiles

Source: Bloomberg

 

China customs data released at the weekend showed soybean imports rising 14% in August from a month earlier. There was a noticeable shift to imports from Brazil after Beijing imposed tariffs on US imports. China’s attempt to turn to domestically-grown soybeans when faced with import tariffs was dealt a blow earlier this week after cold weather reports in the northeast part of the country raised concerns about damage to crops.

Soybeans are on a gradual uptrend, aiming towards the 55-day moving average at 8.5498 with daily stochastics momentum indicator giving a bullish reading.

 

WHEAT continues to hold above the 78.6% Fibonacci retracement level of the July 11 to August 2 rally at 4.839. On September 7, the commodity touched a near-eight week low of 4.841 and has seen a healthy rebound since then to 5.067. The 55-day moving average is at 5.087.

The strong up-move could be attributed to news that Australia has cut its wheat production forecast for the 2018/19 season by 13% to a 10-year low, due to severe droughts across many growing regions.

 

SUGAR is continuing its rebound from the August low and is now testing resistance at the 100-day moving average at 0.1123. The commodity has so far managed a 13.6% rally from the 10-year low of 0.0981 hit on August 22. Mauritius, where sugar is its biggest agricultural export, has trimmed its 2018 output estimate by 5.7% due to unfavorable weather and lower tonnage from small producers.

 

CORN is poised for its fourth up-day in a row, though gains are mediocre at best. The commodity is currently trading at 3.527 with the upside likely capped by the 200-day moving average at 3.6080 and the 100-day moving average at 3.6380. The August 29 low of 3.383 is a possible support point.

Commodities Weekly: Gold below $1,200 as Turkey tremors boost dollar

Many commodities are falling victim to the dollar’s strength as risk-aversion trades gain popularity. Most agricultural assets are suffering from supply overhangs while metals continue to take the cue from gold and head lower. Oil prices have struggled to rally despite some supply-side issues.

Precious metals

GOLD broke through the 1,200 mark yesterday for the first time since March 2017 as it continued to be pressured by the dollar’s steady rise on safe haven flows. In the latest data from CFTC as at August 7, short positions built up by speculative traders were at their highest since data began in 2006, according to data compiled by Bloomberg. Overall however, net positioning is still long by 12,688 contracts, which is still the least since December 2015.

Gold holdings by SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, are at the lowest since 2016 as the fund saw more than $1 billion worth of withdrawals in Q2, Bloomberg reports.

Monthly Gold Chart

Source: Oanda fxTrade

SILVER continues to shy away from the 55-day moving average, echoing the sentiment in gold. Speculative accounts reduced their net long positions by 1,523 contracts in the week to August 7, according to latest data released on Friday, with most of the adjustment coming from an increase in short positions rather than liquidating longs. The gold/silver (Mint) ratio is higher this week, gaining to 79.360 from 78.805 at last week’s close.

PLATINUM is hovering near 10-year lows having failed to reach the downward-sloping 55-day moving average, which is currently at 852.54. The dollar’s strength has had a part to play in the bearish bias, though the cloudy industrial demand outlook given the ongoing trade wars also pressures. The metal is currently trading at 799.87 with the July 19 low of 792.64 a mild support point.

PALLADIUM is still in a broader downward trend as it continues to retrace the rally in the second half of July. The commodity has breached the 61.8% Fibonacci level at 891.60 and is currently trading at 889.95. Speculative accounts increased their short positions by 1,207 contracts in the week to August 7, latest CFTC data shows.

Base metals

COPPER markets continue to be plagued by the threat of strike action at some of the world’s largest mines. BHP is waiting to hear the response to its sweetened offer to workers at its Escondida mine in hopes of averting a strike, while strikers at the Caserones mine are set to go on strike on August 14 if mediation fails. Despite these potential supply disruptions, copper is struggling to gain any kind of foothold with a one-day spike higher on August 9 beaten back the following day. The base metal is facing its third straight down day and is now at 2.7102. The July 19 low of 2.6501 could be the next support level.

 

Energy

OIL prices are on the defensive with WTI sliding to a seven-week low overnight as markets consider the broader impact of the meltdown in the Turkish currency and economy. Additional pressure has come from the dollar’s bid bias as a safe haven stronghold, while a weekend IEA oil market report predicted that global demand for oil would slacken for the rest of this year before reviving next year. The combined downward pressure was strong enough to overcome reports that Saudi Arabia’s production has been scaled back in July even as Iran sanctions kick in.

WTI is now at 67.732 and has traded below the 100-day moving average, currently at 68.495, for the last four days. The Brent/WTI spread has moved back above the 4.0 mark, to 4.8 currently, after a brief dip below last week. The weekly EIA crude inventory data is due tomorrow and is expected to show a rebuild of 1.2 million barrels, according to the latest survey of analysts, after last week’s drawdown.

NATURAL GAS is holding just below seven-week highs touched last week as it looks to extend the rally started in the middle of last month. The rally comes despite reports that China’s PetroChina is considering suspending all US gas purchases as part of the US-China tariff war.

Natural Gas inventories rose to 46 billion cubic feet in the week to July 30, according to EIA data released August 9. The commodity is currently trading at 2.934 and is looking to test the 100-month moving average which is currently at 3.0126.

Agriculturals

SUGAR continues its downward trend amid no letup in supply and building of stockpiles. India’s farm ministry reported on Friday that its monsoon-sown crop area had risen to 5.06 million hectares, up from just below five million last time. Sugar is now at 0.1015 after touching 0.1007 earlier today, the lowest since August 2015. That low was 0.1002 and may provide support at the next test.

CORN yields are seen higher than a year ago with the majority of US producing-States expecting higher harvests, according to the latest crop report from the US Department of Agriculture. US exports are expected to rise reflecting US competitiveness and reduced competition from Brazil. The season-average corn price received by producers is calculated to be down 20 cents at the midpoint in a range of $3.10 to $4.10 per bushel. Corn is now at $3.522 as it holds above the 50% retracement level of the rally from July 12 to August 8.

Daily Corn Chart

Source: Oanda fxTrade

SOYBEANS may struggle to overcome the 55-day moving average, which has capped prices since May 30, after the latest US Department of Agriculture’s WASDE report (world agricultural supply and demand estimates) predicted that soybean supplies for the 2018/19 season would reach a record 5,040 million bushels, 5% higher than last month’s forecast, while ending stocks are projected at 785 million bushels, up 205 million from last month. The average soybean price for the season is estimated to be $8.90 per bushel. The commodity is currently at 8.507.

WHEAT is in the process of retracing its advance to test the 100-month moving average earlier this month. The average now sits at 5.762 and the commodity managed a spike high of 5.807 on August 2 before retracing. Wheat is currently trading at 5.292 while the 55-day moving average lurks below at 5.049. The USDA August WASDE report was bullish for prices, forecasting lower supplies, greater use and reduced stockpiles. It estimates the season-average farm price is up $0.10 per bushel at the midpoint with the range at $4.60 to $5.60.

Commodities Weekly: Oil prices firmer as Iran sanctions set to kick in

Oil prices are edging higher on supply concerns involving both Saudi Arabia and Iran while hot, dry weather across the northern hemisphere is having an effect on anticipated harvests in the agricultural sector and also increasing expected demand for energy as the world tries to keep cool. However, ongoing trade tariff wars continue to be a damper on rallies for some products.

Energy

OIL prices edged higher, with WTI rising to a near one-week high yesterday, after the Trump Administration confirmed that the first phase of new Iran sanctions will go into effect later today. In addition, OPEC sources suggested that Saudi Arabia’s supply had unexpectedly fallen in July.

Prices continue to hold above the 100-day moving average on a closing basis, which has held since June 19. The Brent/WTI spread has dipped marginally below the 4.0 mark this month. The weekly EIA crude inventory data is due tomorrow and is expected to show a drawdown of 1.17 million barrels, according to the latest survey of analysts, compared with an increase of 3.8 million barrels last week.

Brent/WTI Daily Chart

Source: Oanda fxTrade

An anticipated hot spell across Northeastern US in the coming weeks has built expectations of an increase in demand for NATURAL GAS for cooling purposes, and has helped propel prices to a near five-week high. There appears to be little reaction to news that China said it is considering imposing a 25% tariff on imports of US natural gas as part of its retaliation against the US’ proposed tariffs on $200 billion worth of Chinese imports.

Natural Gas inventories rose to 35 billion cubic feet in the week to July 27, according to EIA data released August 2. The commodity is currently trading at 2.875 after closing above the 55-day moving average yesterday, the first time since July 3.

Precious metals

GOLD continues to struggle near 18-month lows, just above the 1,200 level, as the US dollar reigns supreme. Speculative net long futures positions slid to 35,337 contracts in the week to July 31, according to CFTC data released Friday. That is the lowest net long position since January 2016. SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, also said its holdings fell 0.78% to 788.7 tonnes on Monday from 794.90 tonnes on Friday, Reuter reports.

Gold has fallen another 1.6% this month, set for a fifth straight monthly decline and is down 11.8% from the peak in April.

SILVER continues to be capped by the 55-month moving average and is facing its third straight monthly decline. Speculators’ bullish positioning increased by 2,326 contracts in the week to July 31, according to the latest CFTC data. The gold/silver (Mint) ratio is currently sandwiched between the 55- and 100-day moving averages at 78.17 and 78.96, respectively.

Gold/Silver (Mint) Ratio Daily Chart

Source: Oanda fxTrade

PLATINUM has traded sideways so far this month with activity confined to 812-841 parameters. The downward-sloping 55-day moving average continues to be an upside barrier and has capped the upside since March 1. It’s currently trading near mid-range at 824.10.

PALLADIUM is currently retracing the rally seen late-July and currently at 907.96, holding just above the 50% retracement level of that July 19-25 up-move, which is at 901.24. Traders increased their net long speculative positions in the precious metal for the first time in four weeks in the week through July 31, according to CFTC data.

 

Base metals

COPPER is still being dogged by escalating trade wars amid a cloudy outlook for global growth. The industrial metal survived a test of the 55-month moving average last month and that technical level, currently at 2.6964, should continue to provide support. The July low of 2.65 would be the next support level. Speculative accounts reduced their net long positions by 1,143 contracts to 8,224, the least since the week of May 9, 2017.

The pending strike at BHP’s Escondida copper mine in Chile, the world’s largest, appears to have been averted as the company announced Monday it had formally requested government mediation with the union in its latest wage negotiations. The two parties have until August 13 to reach an agreement, with a possible extension for a further five days.

Agriculturals

SUGAR continues its rebound from three-year lows as dry weather in growing regions affects anticipated harvests. A recent report suggested sugar output from the EU could fall as much as 7.8% from a year ago due to this effect. Sugar is poised for is third consecutive up day after hitting an apparent near-term bottom of 0.10201 on August 2. It’s currently trading at 0.10814 with resistance seen at the 55-day moving average, currently at 0.1153.

SOYBEANS are perhaps one of the hardest hit commodities in the trade tariff wars since it was almost first on the list. The commodity staged a near 12% rally in July from near-term lows as analysts anticipate continued demand, despite China reportedly seeking alternative sources, including home-grown products. August has seen the commodity consolidating that move.

An example of this continued demand is seen in data released by the United States Department of Agriculture yesterday that showed a cargo of soybean left US shores for China, despite the introduction of China tariffs. However, Xinhua News Agency reported Sunday that China could reduce imports of US soybeans by as much as 10 million tons as it seeks alternative sourcing and alternative products.

The global hot spells that have fueled Natural Gas demand have also caused droughts in WHEAT-growing regions, wreaking havoc with global harvests, which are seen shrinking to a three-year low. Wheat prices hit a three-year high earlier this month and are currently testing the 100-month moving average resistance, which is at 5.7657. The commodity has not closed above this moving average since April 2014.

Wheat CFD Monthly Chart

Source: Oanda fxTrade

Commodities Weekly: No traction for commodities as the dollar softens

The US dollar is facing a mild period of weakness ahead of a slew of central bank rate decisions and key data this week. Despite the dollar’s retracement, commodities have mostly failed to capitalize. Precious metals are still pressured by a gloomy demand outlook and news that growth in China’s manufacturing sector had slowed for a second month has added to the pressure. Oil has rebounded amid supply concerns, while crops are mostly suffering from lingering excess inventories and supply.

Energy

CRUDE OIL has pushed up to more than two week highs as supply issues hold the market’s attention. Reports that some North Sea fields are shutting down due to labor strikes, ongoing Middle East geopolitical tensions threatening to disrupt Saudi Arabia supply lines, continued difficulties with Venezuela’s output and the looming imposing of Iran sanctions are all contributing to the bid tone, which has seen WTI rise from $67.5 to $71.09 yesterday.

According to a recent Reuters survey, production from OPEC members hit a 2018 peak in July, one month after the new OPEC accord was struck in Vienna. Following the OPEC decision, Kuwait and the United Arab Emirates raised output by 80,000 bpd and 40,000 bpd respectively in July, the survey found with all members pumping a total of 32.64 million barrels per day, up 70,000 bpd from June.

European Commission’s Jean-Claude Juncker met with US President Donald Trump last week for talks aimed at avoiding a trade war. One of the outcomes of the meeting was that the EU agreed to buy more US NATURAL GAS to diversify its energy supply. Natural Gas looks set for its sixth straight day of gains as it climbs from two-month lows hit earlier this month. The first technical resistance point comes at 2.8424, which is the 200-day moving average, with the 55-day moving average close behind at 2.8594.

Precious metals

GOLD continues to be top heavy near the lower end of this month’s range. Even with the US dollar giving back some of the recent gains ahead of the FOMC meeting on Wednesday (NYT), gold has struggled to make any headway. Latest data from CFTC shows speculative accounts reduced their net long positions in gold by 9,200 contracts in a snapshot taken July 24. Gold is currently trading at 1,221.8 with support expected at the recent low of 1,211.1 and resistance at the 55-day moving average at 1,266.2.

SILVER likewise is unable to shake off the summertime blues and is also trading at the lower end of the month’s range, facing its second monthly decline in a row. The gold/silver ratio is still holding above the 55-month moving average, currently at 73.05, and has traded above it on a closing basis since March 2013.

Gold/Silver Monthly Chart

Source: Oanda fx Trade

Slowing industrial demand for PLATINUM continues to weigh on prices as the automotive industry continues its shift away from diesel engines. The precious metal has been on a steady decline this year, dropping almost 23% from its peak in January and the fundamental outlook suggests more declines to come. Speculative accounts are still maintaining net short futures positions, according to the latest Commitment of Traders report as at July 24.

PALLADIUM attempted a technical rebound early last week but this stalled on Thursday and is now in consolidation mode below the 55- and 100-day moving averages at 962.53 and 968.11, respectively. Speculative accounts were net sellers of futures contracts in the week up to July 24, according to the latest CFTC data.

Base metals

COPPER continues in the doldrums with prices struggling to extend the slight rebound from one-year lows near 2.65. Reuters reported Monday that Brazil’s geological service is considering auctioning off rights to six previously unexplored areas next year. It is reported that these areas could be significant sources of copper, gold and minerals.

Agriculturals

A bumper SUGAR harvest in Mexico was completed early-July with a 39,000 metric ton increase from previous estimates, according to the latest USDA sugar and sweeteners outlook. Most of this will be destined for international sugar markets and this has helped keep sugar prices under pressure this month. Sugar prices today hit 0.10616, the lowest level since September 2015. Momentum indicators on the charts suggest further downside is possible, and the next support level can be found at the August 2015 low of 0.10018.

SOYBEANS saw heavy demand in June as exporters rushed to deliver orders ahead of the introduction of import tariffs by China as part of the first tranche of tariffs in the US and China trade war. Even so, prices collapsed in the month amid the combined pressures of favorable US growing conditions, increased sown acreage and inventory overhang. July has seen prices rebound from mid-month lows to stand at 8.733 currently. On the daily chart, stochastics momentum is starting to look stretched and the soybean CFD seems to be struggling to breach the 8.757-8.783 area, which has capped gains on six separate occasions since late June.

Soybeans Daily Chart

Source: Oanda fxTrade

In its July WHEAT outlook, the US Department of Agriculture reported that vastly improved weather conditions from a year ago have helped lift projected yields for spring wheat in the 2018/19 season. Expanding US production and a reduction in production from overseas competitors suggest the 2018/19 crop could see higher exports, the report says. Despite the increased supply, wheat is retesting the June high of 5.421 and, if breached, would take wheat to a more than one-year high. The commodity is currently trading at 5.328 after touching 5.405.

CORN is continuing its strong rebound from 22-month lows having risen in eleven out of the last twelve trading sessions. The crop is currently at 3.603, testing the 55-day moving average at 3.6159 for the first time since June 4.

Commodities Weekly: Copper hovers near one-year low on global growth uncertainty

The risk that the ongoing trade wars could escalate to such an extent that all $500 billion worth of Chinese exports to the US could be subject to some form of tariff is causing some concern among investors. At the recent G-20 summit in Buenos Aires, the consensus was that the trade spat is a major threat to global growth going forward, even if it appears robust at the moment.

Industrial metals have been on the defensive for the past two months while gold continues to struggle to uphold its safe haven status as the US dollar reigns supreme. Crude oil is consolidating after last week’s 10% drop while the agricultural sector is attempting a rebound after a two-month bear phase.

Base metals

COPPER prices remain subdued amid global demand concerns. The base metal has been in virtual freefall since early-June, and last Thursday hit its lowest level since July 14 last year. It’s now trading at 2.7249 with possible sign of bullish momentum divergence unfolding on the daily chart.

Copper Daily Chart

Bullish Divergence Daily Chart Source: Oanda fxTrade

Negotiations surrounding the strike at Chile’s Escondida copper mine, the world’s largest, are deadlocked without signs of an imminent agreement as the current contract expires in less than a week. Additional labor tensions may be brewing at another mine in Chile, Lumina Copper’s Caserones mine, according to a Reuters report late last week.

 

Precious metals

GOLD remains under pressure even with all the trade war and geopolitical tensions rising around the globe. The war of words between Trump and Iranian President Hassan Rouhani, where Trump tweeted to Rouhani on Sunday to “NEVER, EVER THREATEN THE UNITED STATES AGAIN” after Rouhani said that hostile U.S. policies towards Tehran could lead to “the mother of all wars”, has helped to lift prices only briefly. The metal is currently trading at 1,223.74.

According to the latest Commitment of Traders report as at July 17, speculative short positioning is at its highest since January 2016. It may be interesting to note that, at such extreme positioning, gold rose a total of 19% during January and February of 2016 from the near-term low in December 2015.

There also appears to be no respite for SILVER, which is also hovering near one-year lows though the Mint (gold/silver) ratio has been edging up to 2-1/2 month high of 79.942.

Gold/Silver (Mint) Ratio

Source: Oanda fxTrade

PLATINUM has rebounded strongly after another test of the sub-800 levels. It touched 793.393 last Thursday, the lowest since December 2008, but has since recovered to 831.87. CFTC data as at July 17 showed that money managers were net sellers of 783 contracts during that week, and overall short positions exceeded long ones by 29,493 contracts.

PALLADIUM has managed to snap a five-day losing streak and has bounced 6.3% to 915.27 from the near-term bottom last Thursday. Strong resistance is to be found in the 968.60-971.39 window, which represents the 55- and 100-day moving averages, respectively

Energy

NATURAL GAS is stuck in the lower half of its three-month 2.60-3.00 trading band with slack demand during the summer months likely to keep it pegged lower. A Reuters report yesterday also highlighted that the world’s largest oil companies are pumping more natural gas than ever before, satiating rising global demand for greener fuels. Major companies have upped output by a collective 15% in the past decade, thanks to better technology and lower costs, the report states.

CRUDE OIL prices have edged lower this week after last week’s EIA storage data showed a surprise build of 5.8 million barrels after previous week’s huge 12.6 million barrel drawdown, the largest since September 2016. WTI is currently trading at 68.557 while the Brent/WTI spread is holding at about 4 pips.

In other news, Iran has overtaken Saudi Arabia as India’s number two oil supplier in the April-June quarter, India’s oil minister said on Monday, while Iraq remains top of the list of India’s crude suppliers.

Oil Drops After Oversupply Concerns Take Over

Agriculturals

SUGAR appears to be building a near-term base as the commodity consolidates and holds above last week’s 2-1/2 year low of 0.1063. It is now trading at 0.1086.

In a report last week, the US Department of Agriculture raised global sugar production forecasts for the 2017/18 marketing year, as a result of favourable growing conditions in South and Southeast Asia, increasing the estimated global production surplus to its highest level in several decades.

Bulls will be keeping an eye on weather patterns in the second half of the year amid concerns that another El Nino system in Asia could strike. Last week the Indian government approved an increase in prices that sugar mills must pay for sugar cane by about 7.8% effective October 1.

CORN is also staging a recovery from 22-month lows, though is still lower on the month, the third consecutive monthly decline. In their July World Agriculture Stocks and Demand Estimates (WASDE) report, USDA pegged new crop carryout on corn at 1.55 billion bushels, which is considered a low figure for this time of year.

Last week’s rally in SOYBEANS appears to have come to an end, with crop looking set to post its second straight day of declines. One of the first imports to be subjected to Chinese tariffs, soybeans have been trading with a softer bias since end-May. However, last week’s low of 8.074 should provide near-term support while the July 6 high of 8.761 will be the next resistance point.

WHEAT touched its highest level in six weeks yesterday rising just above the 5.0 handle. In the latest WASDE report, the US Department of Agriculture raised US 2018/19 wheat supplies by 74 million bushels on increased beginning stocks and higher production. For the 2018/19 period the forecast for US wheat production was also raised 54 million bushels to 1.88 billion. Outside of the US, it saw lower production out of the EU, Australia and Russia totaling 9.3 million tons.

Commodities Weekly: Oil tumbles on supply/demand dynamics

Oil has been the biggest mover this week with the US-China trade war continuing to undermine the global demand outlook, despite an upbeat assessment of the US economy by Fed Chairman Powell. Gold is still struggling to maintain its safe haven status and other metals remain at the mercy of the rampant US dollar, while the agricultural sector remains broadly under pressure.

Energy

Crude oil prices have slumped more than 10% over the past week as the threat of increased supply and tapering demand take hold. There is growing concern that Trump’s tariff initiative will dent global growth and hence put a lid on, or even reduce, the demand for oil. Couple this with chatter that Saudi Arabia has offered more crude cargoes to Asian customers, so oil continues its retreat from 3-1/2 year highs struck at the beginning of this month.  West Texas CFD is now trading at 68.257 and the Brent/WTI spread is holding steady at about 4 pips.

Oil Drops After US May Grant Waivers to Iran Oil Purchases

 

Natural gas appears to still be in consolidation mode after the steep slump in February this year. Summer months in the northern hemisphere is likely to keep demand subdued and Gas should remain close to the current 2-month lows. Near-term support could be found near last year’s lows in February and December around the 2.54 level.

Germany’s dependence on Russian gas and oil has once more come in to the spotlight following Trump’s visit to the NATO summit last week. Concerns that the building of a new pipeline directly linking Russia and Germany will introduce another “threat” level to the NATO alliance, be it from a dependence perspective or from a national security perspective.

 

Precious metals

Gold is still struggling for traction even as the US dollar pauses for breath after its stellar rise. The precious metal is now down 5.3% vs the dollar from its June 13 peak and has fallen 9.25% from this year’s high on January 25. Gold may find minor support at the December 2017 low of 1,236.683 and will likely be capped at the recent high of 1,266.113.

Source: Oanda fxTrade

There was little reaction to news that production at the Tongon gold mine in the Ivory Coast, which produced 288,680 ounces of gold last year, had come to a halt amid a strike by miners as government-led negotiations broke down.

Gold dips as retail sales climb

Latest data from Chicago’s Commitment of Traders report, with the snapshot taken as of July 10, shows that managed money accounts were net sellers of 1,273 gold contracts from a week prior and short positions exceeding long positions by 2,527 contracts.

Silver continues to echo gold’s heaviness and it looks set to retest the December low of 15.6316 in the near term. The low so far this year has been 15.7064. CFTC data as of July 10 shows money managers reduced net long positions by 3,434 contracts, but overall still hold net long positions.

The gold/silver (Mint) ratio has been steady over the past week with a mild upward bias targeting the 100-DMA at 79.1150.

Source: Oanda fxTrade

Platinum is just about managing to hold above the 800 mark following its first dip below the level since December 2008. A Reuters report from July 11 suggested that current prices are below the average production cost in South Africa, which was calculated to be $834 an ounce last year. Meanwhile, Johnson Matthey forecasts a global oversupply of 316,000 ounces, the biggest since 2011, for the year. The 55-DMA continues to cap to the upside while the July 3 low of 798.365 should hold in the near-term.

Palladium has drifted towards the lower end of its recent 3-month range. It is currently retracing the uptrend started at the beginning of 2016 and has so far managed a correction as deep as 21%. Palladium is currently trading at 922.52.

Base metals

Copper has plunged more than 18% from its peak in June as the escalating trade war between the US and China escalates, casting a huge shadow over the outlook for the global economy. The base metal closed below the 100-week moving average support last week for the first time since October 2016.Copper is attempting a rebound but any recovery could be limited by the slightly slower China Q2 GDP data released yesterday. Any impact from trade wars going forward on growth could limit demand for copper, since China is the top industrial metals consumer.

Agriculturals

Slowing demand and increasing production are both combining to keep sugar pressured. A report from India Sugar Mills Association yesterday suggests India’s sugar production could increase by 8.6% to 10.2% in the 2018-19 season. It estimates total acreage devoted to sugarcane is around 8% higher than the 2017-18 period. Money managers added about 11,000 contracts to short positions, according to the latest CFTC data as of July 10.

As with any crop, the weather could play a significant role and the second half of the year could see concerns about another El Nino weather pattern in Asia emerging. That could be the only hope for bulls. Sugar is now at 0.10946 after touching 0.10633 earlier today, the lowest since September 2015.

Corn is still attempting to recoup some of June’s heavy losses, and not making any headway. The CFTC data as of July 10 shows money managers are still holding net short positions, adding a net 10,064 contracts during the reporting week.

Soybeans touched a 9-1/2 year low of 8.074 early yesterday, yet appears poised for a second consecutive day of gains today. This would be the first time since end-May that the commodity has managed more than a one day uptick.  Monday’s low of 8.074 should provide near-term support while the July 6 high of 8.761 will be the next resistance point.

Wheat continues to hold above the 200-DMA at 4.4944 and is currently consolidating a rebound off a near-three month low seen last week. In a report released at the end of last week, the US Department of Agriculture offered a bullish outlook for wheat production, increasing harvested acres while upping yields per acre as winter wheat yields in the plains have been better than expected. They are also expecting a whopper spring wheat crop.

Commodities Weekly: Gold saved by dollar’s retracement

Overall, the first salvos in the US-China trade war has undermined confidence in the metals space, with traditional safe-haven assets struggling for traction as other havens offer better returns. The energy sector has been driven higher by supply concerns, while the agricultural sector remains broadly under pressure.

Precious metals

Gold had been at the mercy of the US dollar’s firmness during the second half of June, struggling to maintain its label as a safe haven in times of trouble. The precious metal slumped almost 5.5% vs the dollar from its recent peak on June 13 to the near-term low on July 3. The rebound so far has taken the metal to the 38.2% Fibonacci level of the drop and is now consolidating at 1,257.513.

Gold Daily Chart

Source: Oanda fxTrade

Latest data from Chicago’s Commitment of Traders report, with the snapshot taken as of July 3, shows that managed money accounts were net sellers of 1,230 gold contracts from a week prior and short positions exceeding long positions by 1,254 contracts.

Silver has also tracked hold’s progress to some degree during the period. The sell-off in the second half of June saw a bullish divergence pattern unfolding on the stochastics momentum indicator, which suggested a near-term base could be forming. Sure enough, we have seen the rebound unfolding this month and the next resistance point can be found at the 55-DMA, currently at 16.4320.

Silver Daily Chart

Source: Oanda fxTrade

The gold/silver (Mint) ratio seems to have built a near-term base mid-June and has since rallied to test the 55-DMA at 78.4841. It is also oscillating around the 200-DMA at the moment during its consolidation period.

Platinum is staging a modest recovery from its near-5 month downtrend after the metal traded below the 800 mark at the start of the month, the first time since December 2008. The 55-DMA continues to cap to the upside while the July 3 low of 798.365 should hold in the near-term.

Palladium is trading near the middle of its recent 3-month range. It is currently retracing the uptrend started at the beginning of 2016 and has so far managed a correction as deep as 21%. Palladium is currently trading at 954.853.

Base metals

Copper has fallen just over 6% so far this month to touch its lowest level since July last year. The base metal is testing the 100-week moving average, which has held on a closing basis since November 2016. However, investors are keeping an eye on labour negotiations at BHP Billiton’s Escondida mine in Chile, the largest in the world. The current contract expires at the end of this month and any signs that negotiations become protracted and an agreement may not be reached could have implications for copper supply and result in higher prices.

Energy

Natural Gas continues to struggle to gain traction after the hefty slump in February this year. As we are in the midst of the summer months in the northern hemisphere, pressure should remain on gas with near-term support found at the 100-DMA at 2.7914.

Latest data from the US Energy Information Administration (EIA) storage change released last Friday showed an increase of 78 billion cubic feet, higher than the estimate of 75 billion and up from the previous week’s 66 billion. Stocks were 717 billion cubic feet less than this time last year.

Crude oil prices have been edging higher since the OPEC meeting last month amid supply concerns and steady demand. Brent prices received an additional boost following news today that oil workers in Norway are scheduling a strike later today after recent wage talks failed. Coupled with supply issues from Libya after oil port closures, Iran heading toward US sanctions, and ongoing issues with Venezuela, the path oil least resistance for oil prices still appears to be higher. West Texas prices scaled $75 p/barrel last week, while the 100-month moving average is at 74.6907. West Texas CFD is now trading at 74.094 and the Brent/WTI spread is about 4.3 pips.

Brent/WTI Spread Chart

Source: Oanda fxTrade

Agriculturals

Sugar continues to feel the pressure of rising global stockpiles amid surging production in Asia, and slowing demand. Money managers added more than 30,000 contracts to short positions, according to the latest CFTC data as of July 3. As with any crop, the weather could play a significant role and the second half of the year could see concerns about another El Nino weather pattern in Asia emerging. That could be the only hope for bulls. Sugar is now at 0.11165

Corn is attempting to recoup some of June’s heavy losses, and having a tough time of it. This despite a June 29 report from the US Department of Agriculture that showed total acreage for corn and soybeans down 1% from a year ago.

With Soybeans a target for China import tariffs in retaliation for the Trump administration’s actions, soybeans are struggling to bounce strongly off recent 9-1/2 year lows. Friday’s low of 8.334 should provide near-term support while the June 25 high of 8.961 will be the next resistance point.

Wheat broke a three-day rising streak on Monday and has continued the retracement today. Daily momentum has turned bearish, suggesting the fall has a bit further to g

Trade war -will cooler heads prevail ?