GOLD:
My assessment is that if it weren’t for the Fed, gold futures
would have breached the psychological $1300.00 level and ended up about $30.00
lower. Instead, bullish gold investors have the central bank to thank for last
week’s solid gains.
The market posted its biggest weekly advance since July after the
Fed opted to leave interest rates unchanged while cutting its economic forecast
and reducing the number of expected rate hikes in the future.
Although the daily chart pattern appears to show a massive
short-covering rally took place, data from Bloomberg showed that investors
added at least 6.3 metric tons to exchange-traded funds backed by gold last
week.
The price action suggests that the aggressive buyers from earlier
in the year may be gone, but there are new buyers coming back in who are
willing to defend the market on corrections into value zones. One may even
argue that the rally earlier in the year was overdone since it came on the
heels of the last Fed rate hike. So we’ll be watching this week to see if gold
can follow-through to the upside after last week’s gains.
The gold market could prove to be interesting this week. On one
hand, we have the technical analysts who cite the series of descending tops and
bottoms as two reasons why we can expect to see lower prices.
We also have those who believe that since it is a competing asset
for investment capital with stocks, that its upside will be limited as long as
the equity indices remain at or near all-time highs.
Then we have the bulls who are saying that as long as the Fed is
being cautious about raising rates, and while it is cutting its economic
forecasts and reducing the number of rate hikes in the future, the gold market
has strong upside potential because after all, these legitimate concerns are
enough to raise uncertainty levels which makes gold a good investment.
I tend to look at gold this way. It’s range bound. I think that as
long as there is demand for higher yielding assets like stocks or the
Australian Dollar, gold’s upside will be limited. However, gold prices will
continue to be supported if the U.S. Dollar remains under pressure because of a
steady flow of foreign demand.
CRUDE OIL:
At one point on Friday, crude oil
futures were down over 4 percent, cutting into most of its weekly gains, as
traders reacted viciously to a report that Saudi Arabia did not expect an
agreement at talks next week among major crude exporters aimed at freezing
production.
The selling was triggered after
Bloomberg reported that the Saudi’s did not expect a “decision” at the informal
meeting set for Algiers on September 26 to September 28.
Because of the volatility created by Friday’s price action, I
believe investors are going to play the market tight on Monday, setting up the
possibility of an inside range. Of course, there are going to be stories coming
out of the informal meeting so we could see some volatility due to headline
reactions.
The headline the bullish traders would like to see is one that
says Saudi Arabia and Iran are discussing a production freeze. Then I’d like to
see a headline that says Russia is brokering a deal between Saudi Arabia and
Iran.
Because just like the discussions
in Doha in April, I don’t think a deal will get done unless Saudi Arabia and
Iran are on the same page.
Copper:
LME
Copper rose last Friday with positions opening by longs but then met resistance
because there was no more positive news. LME copper will fluctuate at USD
4,840-4,875/mt on Monday and SHFE 1611 copper will range between RMB
37,650-37,950/mt. In China’s domestic market, spot copper should be
traded at premiums of RMB 100-120/mt on Monday.
ALUMINIUM:
China Aluminum International Trading Co. (Chalco Trading)
announced big hike in aluminum prices it offered in major markets today, it
said on its WeChat.
LEAD:
After 6 years of exploration, Xinjiang announced it found a
world-class ultra-large lead-zinc mine September 25.
In China’s domestic market, demand at downstream battery producers
may increase with the upcoming China’s National Day Holidayduring October 1-7
while supply of spot lead remains tight, helping lead price up. But with
expected declines in SHFE lead, spot lead may drop by RMB 25/mt to RMB
14,400-14,550/mt today.
NICKEL:
Nickel prices are expected to get a boost as Philippine’s major
ore producing region will enter the monsoon season soon.
What months are the rainy season in the Philippines?
A lot of rain (rainy season) falls in the months: May, June,
July, August, September, October and November. Manila has dry periods in
January, February, March and April. On average, the warmest month is May. On
average, the coolest month is December.
Nickel ore inventories at seven major Chinese ports dropped in
the week ending Sep. 23.
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