Fed's No.2 policymaker, Stanley Fischer, said on Sunday the central bank is close to hitting targets for full employment
Fundamental Report 23rd Aug 2016 Bullion – On Monday, spot gold prices declined by 0.22% to close at $1338.3 per ounce s upbeat comments from Federal Reserve officials on the U.S. economy boosted expectations that the central bank could lift interest rates sooner rather than later. The Fed's No.2 policymaker, Stanley Fischer, said on Sunday the central bank is close to hitting targets for full employment and 2% inflation. That followed comments last week from New York Fed President William Dudley that the labor market is improving, and from San Francisco Fed chief John Williams that waiting too long to lift rates could be costly for the economy. Speculators cut their bullish positions in COMEX gold contracts in the week to Aug. 16, but remains near the record high touched early last month. On the MCX, gold prices declined by 0.2% to close at Rs.31651 per 10 gms. Spot silver prices declined by 2.2% on Monday to close at $18.9 per ounce. The fall is in line with decline in gold prices and stronger dollar index. On the MCX, silver prices declined by 2.04% to close at Rs.44516 per kg.
Outlook Spot gold prices are currently trading 0.3% lower at $1336.3/oz. Recent comments by the US Federal Reserve members indicate that the rate hike will be possible in the coming meetings. Besides, strong economic data sets from the US also indicate that the US economy is growing which will exert downside pressure on gold prices.
Energy – WTI oil prices declined by 3% on Monday to close at $47.1 per barrel retreating from last week's two-month highs, on worries about burgeoning Chinese fuel exports, more Iraqi and Nigerian crude shipments and a rising U.S. oil rig count. China's July diesel and gasoline exports soared 181.8% and 145.2%, respectively, from the same month last year, putting pressure on refined product margins. On the crude oil front, U.S. drillers added 10 oil rigs in the week to Aug. 19, the eighth straight week of rig additions, as crude rebounded toward the $50-a-barrel mark that makes drilling viable. Oil rallied with few stops over the past two weeks, going from a bear to bull market as it reversed a loss of more than 20% in early August on speculation Saudi Arabia and the rest of the Organization of the Petroleum Exporting Countries will agree to a production freeze with Russia and other non-OPEC members. On the MCX, oil prices declined by 0.6% to close at Rs.3212 per barrel.
Outlook NYMEX crude prices trading 1.5% lower at $46.8/bbl. On an intraday basis, we expect oil prices to trade lower as international markets are trading negative by more than 1%. The glut in the oil market continues to bother investors across the globe, besides, oil drillers in the US continue to add rigs which indicates increase in oil production in the months ahead.
Base Metals – LME base metals traded lower yesterday as hawkish comments from Fed members concerned the investors regarding the early rate hike. MCX base metals traded lower in line with international trends. LME Copper prices plunged 1% on Monday to close at $4748.5/ton as strength in the DX after Fed Vice Chairman Stanley Fischer added to hawkish comments saying the U.S. central bank was close to hitting its targets for full employment and 2% inflation. Also, exports of unwrought copper and copper products from China, the world's top user of the metal, stood at 75,022 tons in July, a more-than-fivefold increase from the same month a year earlier. Besides, the International Copper Study Group (ICSG) said in its latest monthly report that the global world refined copper market showed a 65,000 tons deficit in May, compared with a 144,000 tons deficit in April. MCX copper prices traded lower by 1.2% to close at Rs.318.4 per kg on Monday.
Outlook LME Copper is currently trading higher by 0.3% at $4764.5/ton. Prices will likely trade lower as investors will remain cautious ahead of comments from Fed Chair Janet Yellen at the central bank's annual meeting in Jackson Hole on Friday. Also, US Prelim GDP data will be closely watched.
ECONOMICAL DATA Indicator French Flash Manufacturing PMI French Flash Services PMI German Flash Manufacturing PMI German Flash Services PMI Flash Manufacturing PMI Flash Services PMI New Home Sales
Country Euro Euro Euro Euro Euro Euro US
Time (IST) 12:30pm 12:30pm 1:00pm 1:00pm 1:30pm 1:30pm 7:30pm
Forecast 49.1 50.6 53.7 54.3 52.1 53.0 575K
Previous 49.6 50.5 53.8 54.4 52.0 52.9 592K
Impact Medium Medium Medium Medium Medium Medium Medium
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