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MCX COMMODITY MARKET MORNING UPDATES – 16 JUNE 2017

Morning Commodities-Market updates

GOLD Gold prices sank to the lowest level in around three weeks, adding to overnight losses following the release of upbeat U.S. economic data and as investors continued to digest the Federal Reserve’s hawkish message. The U.S. Department of Labor said initial jobless claims in the week ending June 10 decreased by 8,000 to 237,000 from the previous week’s total of 245,000. Separately, the Federal Reserve Bank of Philadelphia said its manufacturing index slipped only to 27.6 this month from May’s reading of 38.8. Analysts had expected the index to decline to 24.0. Meanwhile, the Empire State manufacturing index climbed to 19.80 in June from -1.00 the previous month, compared to expectations for a reading of 4.00. The data came a day after the Fed raised interest rates for the second time this year, putting it in a range between 1.0%-1.25%. The central bank maintained its outlook of one more rate hike for this year, as it expects that a tightening labor market will lift inflation to the 2% target over the medium term. The Fed also provided greater details on how it plans to reduce its massive $4.5 trillion balance sheet. The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced. Meanwhile, market players continued to monitor political turmoil in the U.S. after the Washington Post reported that President Donald Trump is being investigated by special counsel Robert Mueller for possible obstruction of justice.

NATURAL GAS U.S. natural gas futures rose sharply, after data showed that natural gas supplies in storage in the U.S. rose less than anticipated last week. The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. rose by 78 billion cubic feet in the week ended June 9, below forecasts for a build of 86 billion. That compared with a gain of 106 billion cubic feet in the preceding week, an increase of 69 billion a year earlier and a five-year average rise of 87 billion cubic feet. Total natural gas in storage currently stands at 2.709 trillion cubic feet, according to the U.S. Energy Information Administration, 10.6% lower than levels at this time a year ago but 8.4% above the five-year average for this time of year. Prices of the fuel notched a third-straight decline on Wednesday after falling to its lowest since March 20 at $2.916, as forecasts for below-normal temperatures across most parts of the U.S. over the next two weeks weighed. Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting outlooks on spring heating demand.

COPPER Copper gyrated after the Federal Reserve lifted U.S. interest rates and took a more hawkish than expected stance on future policy, boosting the dollar and weighing on assets priced in the U.S. currency. The dollar strengthened as expectations for another U.S. rate increase this year were kept alive by a policy statement that indicated huge emergency funds pumped into the economy since 2009 could be trimmed. Below forecast U.S. inflation and retail sales data on Wednesday, coming hot on the heels of reports showing Chinese growth could lose momentum, had already reinforced concerns about the outlook for raw materials demand. The Fed raised interest rates for the second time in three months and said it would start cutting its holdings of bonds and other securities this year. Copper inventories in London Metal Exchange warehouses fell by another 4,125 tones, exchange data showed, taking them to their lowest in more than six weeks. Steel raw material zinc rose after capacity cuts in China drove up steel prices. The global zinc market deepened its deficit to 92,400 tones in April from a revised 72,700 tonnes in March, data from the International Lead and Zinc Study Group (ILZSG) showed. Zinc stocks in LME warehouses fell another 1,800 tones to 316,175 tones, their lowest since early 2009.

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