Gold prices continued to consolidate below the strong resistance at 1271 and above the support at 1263. Gold prices were suppressed mainly due to a strong dollar which was a continuation of the sentiment from last week. The USD was strong against all instruments in general and this affected all the commodities as well and especially gold which continues to remain subdued.
Oil has also been trading in a very small range as well as the price is well supported due to the oil production cuts from the OPEC producers and the production cuts have started to take effect in keeping the prices higher despite a stronger dollar. Under normal circumstances, we would have seen a larger correction in the oil prices due to the dollar strength but due to the production cuts supporting the oil prices, we see that oil is caught in a tight range. Once the dollar strength wanes, we could see oil making its next move and challenging the wall between $52 and $53 again. For today, we expect some more consolidation in this range.
When gold and oil are ranging, we cannot be expecting silver to make a big dance and thats what is happening as well as silver continues to consolidate and trade in range that is even tighter than that of gold and oil. As forecasted, there is no impetus for silver to move on either side and like gold, its being underpinned by the US rate hike expectations and we expect the consolidation to continue in the near future.
ECB president’s speech earlier left the door open for stimulus measures in December and his speech today will be closely watched.
Aluminium Prices to Gather More Strength on Multiple Positive Factors, SMM Says.
Aluminum prices fell after the Chinese National Day holiday due to growing inventories, but staged a strong comeback of late. What’s behind the sudden price surge? Are more gains on the way?
The price gains boil down to 4 major positive factors, SMM understands.
1. Rising costs: Alumina prices in China entered the upward track from mid-August, increasing nearly 50% up to now. Steam coal prices have moved all the way up this year, up as much as 108% so far this year, pushing up power costs.
2. Market fundamentals show no obvious signs of weakening: The amount of aluminum capacity in operation has increased as rising aluminum prices triggered release of new capacity and restarts of idled capacity. Operational aluminum capacity is expected to increase another 300,000 tonnes in October, and output will grow to 2.81 million tonnes. Downstream demand remains positive. Aluminum stocks in domestic five major markets hit a record low of 234,000 tonnes as of October 24, SMM data showed.
3. Impact from crackdowns on vehicle overloading: Crackdowns on vehicle overloading have slowed aluminum ingots shipments in some regions, reducing supply in major markets.
4. Capital side: Investors raised bullish bets while shorts pulled out, given these positive factors.
To sum up, SMM expects aluminum prices to challenge resistance at 14,000 yuan per tonne.
Zinc to Stay High before Year-End, SMM Says
Zinc prices will consolidate at highs before the year’s end due to ore shortfalls, pointing toward 20,000 yuan per tonne, SMM predicted.Zinc concentrate supply tightness deteriorated in China, SMM said. Imports declined sharply and will fall 50% in 2016 with closures at overseas mines during 2015-2016. China’s zinc concentrate imports were 1.60 million tonnes (zinc content) in 2015.Domestic zinc ore output was still low. Supply shortages will expand to 600,000-700,000 tonnes this year, SMM expects.Meanwhile, domestic downstream buyers will snap up goods in Q4 for winter production. These factors will all drive up zinc for the remainder of the year.SMM understands canceled warrants on LME zinc surged 30,000 tonnes October 24. Some traders shipped goods to Asia.
Will Nickel Advance Further after 2-day Rising Streak? SMM Reports.Nickel price, after falling back last week, rose for two days in a row. What’s factor behind the rise, and will the rising momentum be continuing?
SMM gives you a brief analysis across the industry chain. Nickel ore: the Philippines has not released its final result of auditing on mining sector, and the result may be announced around late October. The coming monsoon season in the country’s major ore producing region will negatively affect mining operations and ore shipments to China. NPI: Production costs at Chinese NPI producers have been rising with higher prices of raw materials, including coke and anthracite. Stainless steel: Prices of stainless steel products are rising due to big rise in high-carbon ferro-chrome price and spot supply shortages of some products. SMM expects some mills to cut output from November, considering the rapid rise in high-carbon ferro-chrome price.
SMM expects SHFE 1701 nickel to trade around 81,500 yuan per tonne in the near term.
China Lead Price to Keep Rising Momentum after Tuesday’s Surge, SMM ExpectsLead price in China’s market has been rising since the beginning of 2016, and SHFE 1612 lead, the most active one, advanced to its daily upward limit on Oct. 25, the highest level since October 16, 2012.
What’s the driving force behind the surge?
“The surge is due mainly to tight spot supply in China’s market,” SMM lead analyst explains.
In early September, some domestic primary lead smelters resumed output, but the products mainly served for term contracts, failing to ease spot supply shortages, SMM survey shows.Meanwhile, production at domestic lead smelters has also been restricted by tight ore supply, and the condition is expected to worsen as small domestic mines will suspend operation with the arrival of winter.Moreover, China’s environmental protection inspections have intensified since 2016. The Ministry of Environmental Protection sent 10 teams to 20 provinces for environmental protection inspections from October 21. Small secondary refined lead smelters in Shandong, Henan and Jiangsu have suspended output again, SMM learns, which will also reduce market supply.“Lead consumption in China’s market shows no signs of big improvement, but supply has dropped sharply, so China’s lead prices are expected to keep rising momentum for the foreseeable future,” SMM expects.
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