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In this report we mention the price movements of bullions and energy and major events occurred in international as well as domestic market of previous month. Furthermore it contains the expected trend and range of current month, demand supply pattern, trends of various ETF’s, Gold Silver ratio in bullion counter whereas in Energy counter we analyze the monthly trend and range for both crude oil and natural gas, demand supply equilibrium, inventories, spread of brent crude oil and sweet crude oil etc. We generate long terms calls on these commodities as and when, based upon opportunities.
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SPECIAL MONTHLY REPORT ON
Bullions & Energy(November 2013)
2
BU
LL
ION
S &
EN
ER
GY
November 2013
-3.72
-1.46
-6.89
-0.18
-0.30
0.64
-5.81
0.56
-8.00 -7.00 -6.00 -5.00 -4.00 -3.00 -2.00 -1.00 0.00 1.00 2.00
Gold
Silver
Crude oil
Natural Gas
BULLIONS AND ENERGY PERFORMANCE ( - 31st October 2013) (% change)30th September 2013
Source: Reuters and SMC Research
COMEX/NYMEX MCX
3
BULLIONS
In the month of October lower level buying was
witnessed in the bullion counter as bounce back in
the international market supported its prices
higher. After testing low of below $1250 on domestic
bourses its prices witnessed short covering and test
above $1350 in COMEX. Decline in greenback
supported the bullion counter. But during later part
of the month bounce back in greenback and profit
booking pressurized the prices lower. Gold retreated
during last week of October trimming a monthly
advance, on speculation that the U.S. Federal
Reserve will begin scaling back monetary stimulus
as the economy improves. In the month of
November 2013 bullion counter can move sideways
with positive path. On domestic bourses the
movements of local currency Rupee will be key
factor to watch out which can again depreciate
towards 64 in the month of November.
Recent Trend in Central banks Gold reserves
Russia reduced gold reserves for the first time in a
year in September as Mexico cut holdings for a 17th
straight month, according to International
Monetary Fund data. Russian reserves declined
about 0.37 metric ton to 1,015.1 tons, while Canada
and Mexico also sold. Kazakhstan's reserves
expanded 2.52 tons to 137.04 tons, the data showed.
Central bank gold purchases may total 350 tons in
2013, the World Gold Council predicts, after they
added 534.6 tons last year, the most since 1964.
Canada's holdings fell to 3 tons last month from 3.1
tons, and Mexico's lost 0.1 ton to 123.5 tons, the IMF
data showed. Turkey's holding rose 2.9 tons to 490.3
tons in September, increasing for a third month, the
data showed. Azerbaijan's hoard expanded for a
ninth month, while Belarus, Kuwait, the Kyrgyz
Republic, Serbia, and Ukraine also added to
reserves.
BU
LL
ION
SNovember 2013
WORLD OFFICIAL GOLD HOLDINGS
International Financial Statistics, October 2013
Top 20 World gold holdings countries
Euro Stress tests can impact Gold
European Central Bank announced that in November it
will be starting asset-quality reviews of 130 European
financial institutions. Because of a new regulations
created by the central bank, financial institutions will
have to set aside 8% of their risk-adjusted capital as a
buffer against bad loans on their balance sheets.
Economic indicators and Gold
Gold traders need to continue to closely monitor the
U.S. economic calendar. Weaker data will prolong the
period of time before the Fed actually begins trimming
its monthly bond purchases. The dollar will remain
under pressure as long as the U.S. economic data
continues to show signs of a sluggish economy just
limping along. Bearish dollar could prove bullish for
Gold.
4
BU
LL
ION
SNovember 2013
Rising US debt
Just one day after President Barack Obama signed into law a bipartisan deal to end the government shutdown
and avoid default, the US debt surged a record $328 billion, the first day the government was able to borrow
money. The U.S. national debt has increased by more than a trillion dollars in the past 12 months. This pushed
the total debt above $17 trillion for the first time in history. As the debt increases and GDP growth slows, the debt-
to-GDP ratio will continue to rise at an accelerating pace. The following charts show the steepening rise in total
public debt and the debt-to-GDP ratio of the United States.
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BU
LL
ION
SNovember 2013
Analysis: Silver's underlying demand/supply fundamentals remain weak and that inventory is abundant.
Above ground inventory in China (the growing source of demand for the metal since 2009) remains as high as 18
months of fabrication demand, up from 16 months at the start of 2012 and only 4 months in 2009.
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BU
LL
ION
SNovember 2013
U.S. gold coin Sept sales down 81 pct and $3.34 billion worth of gold jewellery in the first six
safe-haven bids weak months to September, down 58.34 percent from the
same period the year earlier. Total gems and jewellery Demand for U.S. gold coins fell 81 percent in exports fell 15.91 percent to $16.54 billion during the September on a year-over-year basis, as political same period. Imports of gold into India in August and turmoil in Syria failed to rekindle retail buying that September fell to 10.62 tonnes, all of which went into has slowed after months of exceptional bargain the Special Economic Zones. That compares with a hunting.record high of 162 tonnes in May.
India's third biggest gold fund reopens to World demand estimates by WGC for second investorsquarter 2013
India's third biggest gold fund have started In a turbulent second quarter of 2013 gold demand fell accepting fresh investments again after shutting off by 12% to 856.3 tonnes .A wave of outflows from ETFs new buy-ins three months ago to support was the principal cause of the decline, although this government efforts to curb bullion demand and was mitigated by record demand for gold bars and control a rising trade deficit. Reliance Gold Savings coins. Continuing the theme of the previous quarter, Fund, which manages about $300 million have demand for jewellery grew significantly to reach multi-begin accepting subscriptions.year highs. Supply declined by 6%, the primary reason
being a marked contraction in recycling.India's Sept gold jewellery exports rise for
second month
Exports of gold jewellery from India rose for a
second straight month in September. India shipped
India and China still lead the field --WGC period in 2012.In both markets, the strength in second
quarter demand was indicative of opportunistic The consumer market for gold was once again buying not only at the consumer level but also by the dominated by global leaders India and China, which trade, which used the opportunity to bolster stocks. together accounted for almost 60% of the global This attitude among consumers is perhaps a more jewellery sector and around half of total bar and surprising result for China, where the historical coin demand. On a year-to-date basis, total tendency has been to buy into a rising trend, and is consumer demand (for jewellery, bars and coins) in more remarkable for the fact that the second quarter is each country is almost 50% ahead of the same
7
BU
LL
ION
SNovember 2013
traditionally a seasonal low point for gold, coming very positive reception across the globe. Despite the
as it does after the Q1 peak of Chinese New Year- lower prices, demand in value terms was the fourth
related purchases. highest on record. India and China generated the
largest volume increase almost 120t of the 155t
increase in demand was from the two Asian giants.Jewellery demand in Second quarter –WGC
India and China generated the largest volume increase Quarterly jewellery volume rose to its highest level
almost 120t of the 155t increase in demand was from for five years as the sharp drop in prices met with a
the two Asian giants.
Investment demand decline. In value terms, total investment was at a two-
year low. The 151.5t of OTC investment and stock flows Total investment demand (which includes OTC demand was made up of inflows from a number of investment and stock flows – the element of different sources, including investment in gold deposit investment capturing less visible investment flows accounts (not captured in total bar and coin demand): and possible stock changes, as well as any statistical growing interest in such investment vehicles was residual) also showed a notable year-on-year notable in China, Turkey and Japan.
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BU
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ION
SNovember 2013
Gold supply of the year was the lowest first-half total since 2007.
The second quarter saw an extension of the upward A 62.4t decrease in the supply of gold during the drift in mine production, which has been relatively second quarter was almost solely due to reduced stable with a moderate upward bias since Q1 2008. quantities of recycling coming onto the market. The Main contributors to growth in the sector were little 672.1t of recycling supply in the first six months of changed from last quarter, with China generating the the year was the lowest first-half total since 2007. bulk of the increase thanks to expansion among a The 672.1t of recycling supply in the first six months number of small- to medium-sized operations.
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SNovember 2013
Range
Gold MCX Rs 28500-31500 per 10 gms
COMEX $ 1250-1380 per troy ounce
Silver MCX Rs 45000-52000 per kg
COMEX $ 21-25 per ounce
China Gold Demand Equals World Production!
Analysis: China gold demand equals world important medical weapon. The Silver Institute
production as the chart above shows, the gray observed that the medical use of silver has helped
background representing global output. Chinese and reduce the growing threat of antibiotic-resistant
Indian consumers have been buying gold for germs spreading through a hospital. Today, the need
hundreds of years and that trend is unlikely to stop to combat antibiotic-resistant superbugs and to
anytime soon. As these countries continue to gain suppress hospital-acquired infections has increased
economic power and with the population shifts at the importance and number of uses of silver-infused
their back, gold will remain a cornerstone of emerging products.
market consumer's wealth-building strategy.
Mobiles and Paints
Growing Industrial Demand of SilverMotorola uses silver embedded in plastic housings for
Silver conducts heat and electricity better than any many of its mobile phones. Other manufacturers are
other metal on Earth. It is also anti-bacterial. These using silver in keys, or in the cases of calculators and
amazing properties make silver indispensable in a vast other hand-held instruments. Paints too have been
array of modern industrial and technological made more effective against molds, yeasts and various
applications. This industrial demand has been bacteria with the addition of silver.
shifting dramatically since the turn of the century, as In the month of November 2013 bullion
defunct applications for silver like photographic film counter will remain on volatile path as the
have been replaced by new technologies like movement of greenback, outcome of various
photovoltaic power. The evolution of silver's indicators, and movement of local currency
industrial applications continues unabated, with new rupee coupled with Physical, ETF and central
uses being developed every year. In spite of a recent bank demand will influence its prices.
dip in demand for industrial silver due to global
economic volatility, the fundamentals of the
industries consuming silver look promising.
Biotechnology
Recent advances in biotechnology have brought a
renewed focus on silver's centuries old history as an
10
BU
LL
ION
SNovember 2013
Chart OF HUI (AMEX Gold bug index) (Top 15 US Gold mining companies)
Source: Kitco
ENERGYENERGYCRUDE OIL & NATURAL GASCRUDE OIL & NATURAL GAS
12
EN
ER
GY
ENERGY COMPLEX
Crude Oil
In the month of October crude oil prices continued
to tad lower on the backdrop of easing of Middle East
tensions coupled with increasing stockpiles. On
domestic bourses strong local currency kept the
prices pressurized in the crude oil counter. Prices
traded in range of nearly $96-104 in NYMEX and
5950-6500 in MCX. West Texas Intermediate
traded near a four-month low as crude stockpiles
gained for a sixth week in the U.S., the world's
biggest oil consumer. U.S. refineries operated at
87.3 percent of capacity, up 1.4 percentage points
from the prior week. Utilization rates usually peak
during the summer months when U.S. gasoline
demand rises and decline in September and
October.
In November 2013 Crude oil may trade on volatile
path with some short covering can be seen at
current levels .Movement of local currency rupee
can further influence the crude oil prices. Easing
geopolitical tensions, improving crude supplies and
tepid demand growth is keeping lid on crude oil
prices. Crude oil can trade in range of 5700-6450 in
MCX and $92-105 in NYMEX. According to Crude
inventories at Cushing, Oklahoma, the largest U.S.
oil-storage hub and the delivery point for WTI
futures contracts rose by 2.2 million barrels to 35.5
million.
Some key points from EIA estimates
Global Crude Oil and Liquid Fuels
Consumption
EIA projects global consumption to grow by 1.1
million bbl/d in 2013 and by another 1.2 million
bbl/d in 2014, with China, the Middle East, Central
and South America, and other countries outside of
the Organization for Economic Cooperation and
Development (OECD) accounting for essentially all
consumption growth. Projected OECD liquid fuels
consumption declines by 0.2 million bbl/d in both
2013 and 2014. The declines in OECD consumption
are largely due to lower consumption in Europe and
Japan.
Non-OECD Asia, particularly China, is the leading
contributor to projected global consumption
growth. EIA estimates that liquid fuels consumption
in China will increase by 420,000 bbl/d in 2013 and
by a further 430,000 bbl/d in 2014, compared with
average annual growth of about 510,000 bbl/d from
2003 through 2012.
November 2013
Non‐OPEC Supply
Forecast non-OPEC liquid fuels production increases by
1.6 million bbl/d in 2013 and by 1.4 million bbl/d in
2014. The largest area of non‐OPEC growth is North
America, where production increases by 1.4 million
bbl/d and 1.1 million bbl/d in 2013 and 2014,
respectively, resulting from continued production
growth in U.S. onshore tight oil formations and from
Canadian oil sands.
EIA expects smaller production growth from a number
of other areas, including Central & South America and
Asia & Oceania. In Central & South America, forecast
liquid fuels supply increases by 0.1 million bbl/d and 0.2
million bbl/d in 2013 and 2014, respectively, mainly
driven by increases in Brazil's offshore, pre-salt oilfields
output. EIA expects total liquid fuels supply in
Asia & Oceania to increase by 0.1 million bbl/d in 2013
and 0.2 million bbl/d in 2014. The increase in supply in
2014 in this region comes mostly from production
growth in China, Malaysia, and Australia.
Of the 2.7 million bbl/d of total supply disruptions
globally, approximately 0.6 million bbl/d of the outages
occurred among non-OPEC producers. These estimates
of unplanned liquid fuels outages exclude normal
maintenance and reflect the level of volumes shut in
compared with an assessment of effective production
capacity, which EIA periodically updates. Sudan and
South Sudan, Syria, and Yemen accounted for more
than 80% of all non-OPEC disruptions, with smaller
volumes shut in elsewhere, including Brazil and the
North Sea.
OPEC Supply
EIA projects total OPEC liquid fuels production to
decline by 0.8 million bbl/d in 2013 and 0.2 million
bbl/d in 2014. These declines reflect unplanned outages
of crude oil production among some OPEC producers as
well as decreases in Saudi Arabia's production in
response to the increase in non-OPEC supply. Total
OPEC surplus crude oil production capacity in the
second quarter of 2013 averaged 2.2 million bbl/d,
which is 0.2 million bbl/d above the year-ago level, but
still nearly 1.0 million bbl/d lower than the historical
three-year average. EIA projects OPEC surplus capacity
will increase to an average of 2.5 million bbl/d in the
fourth quarter of 2013, and 4.6 million bbl/d in the
fourth quarter of 2014. These estimates do not include
13
EN
ER
GY
November 2013
additional capacity that may be available in Iran but
is currently offline because of the effects of U.S. and
EU sanctions on Iran's oil sector.
U.S. Liquid Fuels Consumption
In 2012, total liquid fuels consumption declined by
395,000 bbl/d (2.1%). Total liquid fuels
consumption for the first half of 2013 rose by 70,000
bbl/d (0.4%) compared with the same period last
year, led by increases in liquefied petroleum gas and
distillate consumption. Projected total liquids
consumption during the second half of 2013
increases 180,000 bbl/d (1%) from the same period
last year, with all of the finished products
contributing to that growth. However, EIA
continues to expect declining gasoline consumption
in 2014 as improving fuel economy of new vehicles
continues to outpace growth in highway travel.
Also, jet fuel consumption remains flat as increased
fuel efficiencies brought about by fleet turnover
more than offset increases in air freight and travel.
In 2014, total consumption of liquid fuels increases
by only 30,000 bbl/d (0.2%) with further declines in
motor gasoline offset by higher distillate fuel
consumption.
U.S. Liquid Fuels Supply
EIA expects U.S. crude oil production to rise from an
average of 6.5 million bbl/d in 2012 to 7.5 million bbl/d
in 2013 and 8.4 million bbl/d in 2014. The continued
focus on drilling in tight oil plays in the onshore
Williston, Western Gulf, and Permian basins is
expected to account for the bulk of forecast production
growth over the next two years. Offshore production
from the Gulf of Mexico is forecast to average 1.3 million
bbl/d in 2013 and 1.4 million bbl/d in 2014. Since
reaching 12.5 million bbl/d in 2005, total U.S. liquid
fuel net imports, including crude oil and petroleum
products, have been falling. Total net imports fell to 7.4
million bbl/d in 2012, and EIA expects net imports to
continue declining to an average of 5.4 million bbl/d by
2014. Similarly, the share of total U.S. consumption
met by liquid fuel net imports peaked at more than 60%
in 2005 and fell to an average of 40% in 2012. EIA
expects the net import share to decline to 29% in 2014,
which would be the lowest level since 1985.
14
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ER
GY
November 2013
15
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November 2013
Crude oil may remain downbeat with
some short covering can be seen at lower
levels as global macroeconomic numbers
along with weekly inventory data in US is
likely to affect the overall sentiments.
Waning Middle East tensions and production recovery in Libya and Nigeria along with
movement of local unit rupee will also give further direction to the prices.
Range
Crude Oil
MCX Rs 5700-6450 per barrel
NYMEX $92-105 per barrel
16
Natural Gas Colder winter temperatures in 2013 and 2014 (compared with the record-warm temperatures in
Natural gas futures in the month of October traded 2012) are expected to increase the amount of
sideways with lot of volatility tracking mixed natural gas used for residential and commercial
NYMEX prices. It traded in range of $3.4-3.85 in space heating. However, the projected year-over-
NYMEX and 220-249 in MCX. In natural gas year increases in natural gas prices contribute to
weather condition in US will give further direction declines in natural gas used for electric power
to the prices. MDA Weather Services stated that in generation from 25.0 Bcf/d in 2012 to 22.1 Bcf/d in
the next 11 to 15 days, the weather pattern continues 2013 and 21.6 Bcf/d in 2014.
to favor above average temperatures "over the U.S. Natural Gas Production and Trade south-central U.S. toward the East, while colder
temperatures remain in the West." Also pressuring Natural gas marketed production is projected to the market is natural-gas production, which increase from 69.2 Bcf/d in 2012 to 69.9 Bcf/d in remains at record highs, fueled by hydraulic 2013 and to 70.4 Bcf/d in 2014. Onshore fracturing and horizontal-drilling techniques that production increases over the forecast period, while have enabled energy producers to tap supplies in federal Gulf of Mexico production from existing shale-gas fields. Natural gas can move in range of fields declines as the economics of onshore drilling 210-250 in the month of November. remain more favorable. Natural gas pipeline gross
imports, which have fallen over the past five years, Warmer weather in autumn is bearish for natural are projected to fall by 0.2 Bcf/d in 2013 and then gas because it decreases demand for the fuel to heat remain near 2013 levels in 2014. LNG imports are buildings. Roughly half of all U.S. households rely expected to remain at minimal levels of around 0.4 on natural gas as their primary heating source, Bcf/d in both 2013 and 2014.a c c o r d i n g t o t h e E n e r g y I n f o r m a t i o n
Administration. In an updated forecast for November, the National Oceanic and Atmospheric
US natural gas storage levels lift above the Administration said the Midwest and Northeast are
six-year historical averageshowing uncertain trends, with equal chances of
From 5 April to 13 September, US natural gas above-normal or below-normal temperatures next inventory has increased by 94% to 3.3Tcf, just above month.the six-year (2007-2012) historical average. US natural gas inventories usually rise in this period as
EIA Natural gas estimates US gas production outweighs demand. For the same time last year, US natural gas storage levels were U.S. Natural Gas Consumption5.4% higher at 3.4Tcf. Henry Hub natural gas prices
EIA expects that natural gas consumption, which have lifted 29% to USD3.64/mmbtu in the past
averaged 69.7 Bcf/d in 2012, will average 69.9 Bcf/d year.
and 69.3 Bcf/d in 2013 and 2014, respectively.
EN
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November 2013
Analysis: Natural gas demand has lifted since the US Environmental Protection Agency (EPA) drafted laws to restrict emissions on new coal power plants. It is likely that the CO2 emission standard for new coal plants will be eased before the draft proposal becomes finalised, but it is st i l l unlikely to change the preference for gas power over coal power in the US utility landscape. We expect the changes to support a structural shift toward natural gas power generation in the medium to longer term, but higher natural gas prices could slow this transition in the immediate term.
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November 2013
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November 2013
Natural gas prices will depend upon weather
conditions and power generation demand
coupled with its consumption pattern and
inventory position in the month of November.
Range
Natural gas
NYMEX $3.20- $3.80 per mmBtu
MCX Rs200-245 per mmBtu
SMC Global Securities Limited is proposing, subject to receipt of requisite approvals, market conditions and other considerations, a further public issue of its equity shares and has filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The DRHP is available on the website of the SEBI at www.sebi.gov.in and the website of the Book Running Lead Managers i.e. Tata Securities Limited at www.tatacapital.com and IL&FS Capital Advisors Limited at www.ilfscapital.com. Investors should note that investment in equity shares involves a high degree of risk. For details please refer to the DRHP and particularly the section titled Risk Factors in the Draft Red Herring Prospectus.
Disclaimer:
This report is for the personal information of the authorized recipient and doesn't construe to be any investment, legal or taxation advice to you. It is only for private circulation and use .The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. No action is solicited on the basis of the contents of the report. The report should not be reproduced or redistributed to any other person(s)in any form without prior written permission of the SMC.
The contents of this material are general and are neither comprehensive nor inclusive. Neither SMC nor any of its affiliates, associates, representatives, directors or employees shall be responsible for any loss or damage that may arise to any person due to any action taken on the basis of this report. It does not constitute personal recommendations or take into account the particular investment objectives, financial situations or needs of an individual client or a corporate/s or any entity/s. All investments involve risk and past performance doesn't guarantee future results. The value of, and income from investments may vary because of the changes in the macro and micro factors given at a certain period of time. The person should use his/her own judgment while taking investment decisions.
Please note that we and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance if this material;(a) from time to time, may have long or short positions in, and buy or sell the commodities thereof, mentioned here in or (b) be engaged in any other transaction involving such commodities and earn brokerage or other compensation or act as a market maker in the commodities discussed herein (c) may have any other potential conflict of interest with respect to any recommendation and related information and opinions. All disputes shall be subject to the exclusive jurisdiction of Delhi High court.
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E-mail sandeepjoon@smcindiaonline.com
Supportive team
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November 2013
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