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COMMODITIES WITH T GNANASEKAR
25 March 2019
This week's FOMC meeting will be remembered and debated for years to come - perhaps even decades. The Fed essentially pre-committed to no rate hike in 2019. The committee downgraded both its growth and inflation forecasts.
This week's FOMC meeting will be remembered and debated for years to come - perhaps even decades. The Fed essentially pre-committed to no rate hike in 2019. The committee downgraded both its growth and inflation forecasts. Having all at once turned of little consequence, we can now dismiss the 3.8% unemployment rate and the strongest wage growth in a decade. Moreover, the Fed announced it would be scaling back and then winding down balance sheet "normalization" by September. This put an impressive exclamation point on a historic policy shift since the December 19th meeting. British Prime Minister Theresa May's top ministers are moving to oust her within days, The Sunday Times reported, as her Brexit strategy lay in tatters just weeks before the United Kingdom was due to leave the European Union. Oil prices pulled back on Friday, as dismal manufacturing data of the United States and Germany gave rise to further concerns over a slowdown in both global demand and economy. The flash U.S. Manufacturing Purchasing Managers' Index (PMI) slid to 52.5, down from 53.0 in February, marking a new low over the past 21 months, according to a report released Friday. Likewise, the PMI for Germany's manufacturing sector fell to 44.7 points from 47.6 points in March, the steepest decline since August 2012, according to the preliminary PMI index published on Friday.
Winning the market is creating the right combination of information, preparation and action. This information from T Gnanasekar equips subscribers to this service with information, analysis, updates and recommendations in the commodity market.
T Gnanasekar will identify trading opportunities with prospect of high returns in commodities. This service will also highlight profitable tradable situations in currencies. The trading calls and follow up calls will be rendered through SMS for timely action. Follow up SMS may be sent if and when there is any change in the advised content of earlier messages. (The SMS will mention entry price range, stop loss levels and the expected target zones)The SMS, calls and other communications will be based on the general market situations and trends and shall not contain any recommendation which is specific to particular client/subscriber or class of clients/subscribers.
The weekly roundup report will provide detailed insights on the current and future trends in the commodities. It will outline the trading opportunities in the week ahead.
Market analysis: Roundup of the weeks activity in the global commodity markets. A detailed view on on Gold, Silver, Crude and any other metals that are in the news or are displaying interesting chart patterns to identify trading opportunities within them.
Week ahead: Lists out the important Economic Data and events that could impact the commodity and currency markets.
Hedging Corner: Provide hedging strategies selectively on commodities that display a possible turnaround in the both the agri and non-agri complex.
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GNANASEKAR THIAGARAJAN will help you navigate the complex world of commodities and profit from it.
Co-Founder and CEO, Commtrendz Research
In his 20 years of experience he has dealt with major market movements across the agriculture and non-agriculture commodities and hence is well versed with devising suitable strategies to get the best out of them. He was a active trader at Scotiabank, one of the largest bullion bank in the world before he founded Commtrendz Research along with Mr. Yeshwant Rao, his mentor and co-founder, who was the Head, Trading Strategies for Reliance Petroleum business. Gnanasekar's views are much sought after and he has been featured as an expert market commentator on television, print and electronic media. He writes a weekly column on Gold, Palm oil and Cotton in The Hindu BusinessLine and a blog on commodities and currencies for the Economic Times. He is a regular speaker at various industry conferences in India and abroad.
Going into next week, we see Bullion prices with a mild bearish bias, but could continue to consolidate, while crude prices are expected to stage a recovery and a possible profit-taking in the dollar
In the latest sign that the world's largest economy remains on the path to recovery, data showed U.S. employers added the largest number of workers in nearly three years in November and wage gains picked up, fueling expectations the Federal Reserve is closer to raising interest rates. The surprise was in the energy markets, which typically reacts positively to any strong economic data. The strong U.S. employment data did little to lift the oil market's bearish mood. However, the strength of U.S. economy, as evidenced by the employment data, contrasts with that of the euro zone, where Germany's Bundesbank this week halved its 2015 growth forecasts for Europe's largest economy to 1 percent.
We will briefly explain the importance of hedging for corporations exposed to price risk as a consumer and producer. If the commodity is exchange traded and has good depth and liquidity, it is qualified for the purpose of hedging risk. We will endeavour to provide hedging strategies from this update selectively on commodities that display a possible turnaround in the both the agri and non-agri complex.
What Hedging Cannot Do?
• It cannot stabilize prices.
• It cannot raise market prices.
• It cannot offer above-market prices.
What Hedging Can Do?
• It can raise revenue, both in a given period and in
• It can stabilize revenue for the organization exposed to price risk.
• It can offer above-market revenues in the long run.
• It can provide predictability to revenue, which means….
• It can enhance producers’ credit-worthiness and ability to borrow.
For effective hedging, it is vital that a trader terminates (or "lifts") his hedged position in the commodity at the same time as he closes his position in the physical market.
In this week, we will look at crudeoil futures and how it can enhance value to corporation that produce crude. The fundamentals in the energy markets are bearish especially after the surprise in the OPEC meet that left output unchanged for possibly political reasons. With an almost forty percent drop in prices from the highs of $115 in June to $67 in December 2014, Brent crude futures is getting ready for an upward retracement. Such a retracement could extend to $87 levels in the coming weeks. However, the potential for downside from present levels still exist, we feel it could be limited and most of the negativity has been already priced in. A colder-than-expected winter may support oil, although prices are likely to slide after peak-demand season ends in the first quarter next year. For corporations that import crude to refine could actually increase physical purchases at present levels and start terminating some of the hedges that it could have initiated earlier only to re instate them at higher levels again.
Buy Brent January contract at $68.00/bbl (MCX: 4,025) and some more near $65.50/bbl( MCX: 3925) with a stop loss at $58 ( MCX: 3700) and a potential target near $85-87/bbl ( MCX: 4900-5,100).
Oil prices closed sharply lower on Friday extended losses below US$70 a barrel yesterday and was set for a second weekly fall, with top oil exporter Saudi Arabia cutting prices, in another indication that it would maintain output in an oversupplied market. Saudi Arabia cut monthly prices for crude it sells to the United States and Asia, while Iraq is set to export more oil, preventing Brent from staging a recovery after a nearly 13 per cent plunge last week. Only a colder-than-expected winter may support oil, although prices are likely to slide after peak-demand season ends in the first quarter next year. But lower prices could also support global economic growth by boosting consumer purchasing power.
Copper prices and other base metals fell on Friday, pressured by a buoyant dollar and concern about a possible early hike in U.S. interest rates following upbeat U.S. jobs data. A strong dollar makes commodities priced in the US dollars more expensive for consumers. COMEX COPPER speculators increase net short positions by 4,048 contracts to 5,919 in week to December 2 to reinforce bearish expectations.
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Week ahead: Important Economic Data
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Crude Oil Inventories
Core Retail Sales m/m
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Natural Gas Storage
Prelim UoM Consumer Sentiment