Fundamental Report 24th Aug 2016

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Aug 24, 2016 - EIA Inventory Forecast - The U.S. Department of Energy's Energy Information Administration (EIA) estimate
Fundamental Report 24th Aug 2016 Bullion – On Tuesday, spot gold prices declined by 0.07% to close at $1337.4 per ounce as markets shifted focus from hawkish comments by a Federal Reserve official over the weekend to a meeting of global central bankers later this week that might provide hints on the timing of a U.S. interest rate increase. Prices fell on Monday after weekend comments by the Fed's No. 2 policymaker, Stanley Fischer, saying that the U.S. central bank is close to hitting targets for full employment and 2% inflation, raising the prospect of a U.S. rate increase. U.S. Federal Reserve Chair Janet Yellen may provide more clarity on interest rates in a speech at the meeting of central bankers, an annual gathering in Jackson Hole, Wyoming, starting Aug. 25. On the MCX, gold prices declined by 0.09% to close at Rs.31623 per 10 gms. Spot silver prices declined by 0.5% to close at $18.8 per ounce in line with decline in gold prices and weak base metals pack. On the MCX, silver prices declined marginally by 0.04% to close at Rs.44496 per kg.

Outlook 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 rose by 2.2% on Tuesday to close at $48.1 per barrel after Reuters reported Iran was sending positive signals that it may support joint OPEC action to prop up the market, before the market pared gains on trade data showing a surprise build in U.S. crude stocks. Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries, refused to join a previous attempt this year by the group and non-OPEC members led by Russia to stabilize production. But sources in OPEC and the oil industry told Reuters that Tehran appeared more willing to support such talks scheduled next month in Algeria. On the MCX, oil prices rose by 0.8% to close at Rs.3239 per barrel. EIA Inventory Forecast - The U.S. Department of Energy's Energy Information Administration (EIA) estimated, on average, that crude stocks declined 500,000 barrels in the week ended Aug. 19. Stockpiles of gasoline were forecast to have decreased 1.2 million barrels last week, while distillate inventories, which include heating oil and diesel fuel, were forecast to have increased 400,000 barrels.

Outlook Oil prices in the international markets are trading lower by 1.1% trading at around $47.56 per barrel. The glut in the oil markets continues to bother investor sentiment while the EIA inventory data due tonight is expected to show a decline of half a million barrels supporting prices.

Base Metals – LME base metals traded mixed yesterday as hawkish comments from Fed members concerned the investors regarding the early rate hike. MCX base metals traded mixed in line with international trends. LME Copper prices fell by 0.8% on Tuesday to close at $4710/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 two percent inflation. Besides, the International Copper Study Group (ICSG) said in its latest monthly report that the copper market saw a deficit of 222,000 tons in the first five months of the year. ICSG said the deficit in May narrowed to 65,000 tons from a shortfall of 144,000 tons in April. However, US new home sales in July plunge to the fastest pace in nearly nine years, latest sign that low mortgage rates and a solid job market are helping support the residential real estate market. MCX copper prices traded lower by 1.4 % to close at Rs.313.8 per kg on Tuesday.

Outlook LME Copper is currently trading flat at $4708/ton. Prices will likely trade lower as investors cautiously await a speech by Fed Chair Janet Yellen in Jackson Hole, Wyoming on Friday. Also, whopping gain of 16% in LME stocks in the last week will exert pressure.

ECONOMICAL DATA Indicator Existing Home Sales Crude Oil Inventories

Country US US

Time (IST) 7:30pm 8:00pm

Forecast 5.55M -0.7M

Previous 5.57M -2.5M

Impact Medium High

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