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ICBC Trading Strategies of Precious Metals and Commodities Market - January 29, 2018
 

I. Precious Metals
Gold

Gold rose on Friday, climbing back toward the previous day's 17-month peak as a report of slow economic growth pushed the U.S. dollar lower, days after the greenback was hammered by a senior U.S. official backing a weaker currency. The dollar was on track for its biggest weekly decline since May.

Spot gold was up 0.3 percent at $1,351.86, up 1.5 percent this week. On Thursday, bullion hit $1,366.07, its highest since August 2016. U.S. gold futures for February delivery settled down $10.80, or 0.78 percent, at $1,352.10 per ounce.

We maintain our view that solid fundamentals in the world's largest economy runs against the dollar index at historic lows. Gold bounced off highs on Friday, showing losing steam in strength. Investors are recommended to cash in profits due to mounting risks.

Silver

Silver was up 0.7 percent at $17.42 an ounce. On Thursday, silver touched $17.69, its highest in more than four months. It was strongest weekly rise among precious metals, up 2.4 percent from last Friday's close.

On trading strategy, we maintain our view that silver will gradually pull back as the dollar index steadies and bottoms up. Investor are recommended to sell at highs and buy on dips during the process.

II. Commodities
Crude Oil

Oil prices settled higher on Friday after hitting three-year highs, with crude also posting a weekly gain as a weaker U.S. dollar underpinned prices.

Brent crude futures settled up 10 cents, or 0.1 percent, at $70.52 per barrel after hitting a session high of $70.83. On Thursday, the contract climbed to as high as $71.28, its highest since 2014.

U.S. West Texas Intermediate (WTI) crude futures closed at $66.14 a barrel, up 63 cents, or nearly 1 percent. On Thursday, they also reached their highest since December 2014, at $66.66. Brent posted a nearly 2.7 percent weekly gain, while WTI reached a weekly gain of 4.3 percent.

U.S. oil drillers added 12 rigs this week, the biggest weekly increase since March, General Electric Co's Baker Hughes energy services firm said in its closely followed report on Friday.

Technically, crude is a little overbought but it's not causing a huge sell-off right now. Market bulls are recommended to hold their positions, while bears shall be cautious as both chasing highs and short at highs are unwise options at current stage.

Copper

Benchmark LME three-month copper fell 0.7 percent to $7,085 per tonne but ended 1 percent higher on the week. On-warrant copper stocks, those not earmarked for delivery, have shot up 70 percent since Jan. 17 to 258,675 tonnes.

Copper is expected to rise further due to retaining momentum and optimistic sentiment as shown by Zinc touching a fresh 10-year high. But the gains of commodities, copper in particular, might be capped if the dollar index lingers at lows.

Soybean

U.S. soybean futures sagged on Friday, pulling back from a rally above $10 a bushel a day earlier. The most actively soybean traded contract closed down 6-3/4 cents at $9.85-1/2 a bushel at the Chicago Board of Trade, after touching a seven-week high of $10.02 a bushel on Thursday.

For the week ended Jan. 18, U.S. reported export sales of 759,300 tonnes, lower than analysts’ estimates of 850,000 to 120,000 tonnes. CBOT March soymeal fell $4.7 to $335.7 per ton. CBOT soyoil ended up 29 cents to 32.79 per pound.

 

Dealing Room, ICBC Beijing Branch
                        Huang Han


(2018-01-30)
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