Commodity Wrap - Gold, Oil, Cocoa, Corn

Gold

• Gold prices experienced downward pressure following mixed decision of the Federal Reserve last week

• ETF increase their holdings of gold, net speculative positioning bounces higher

• Trade uncertainty keeps exerting upward pressure on precious metals’ prices

• Massive divergence between gold and EURUSD on the monthly interval

• Realization of range of the head and shoulders pattern at risk (D1 interval)

In spite of a mixed situation on the gold market, investment demand holds firm. Source: Bloomberg

Massive divergence between gold and EURUSD can be spotted on the monthly interval. Shape of the current monthly candlestick will be crucial as painting a doji could put the continuation of an upward move at risk. Source: xStation5

Gold price threatens breaking above the right shoulder of the head and shoulders formation and invalidating the pattern. Source: xStation5

Oil

• Saudi Arabia is said to fully restore oil output next week

• Production at targeted oil refineries sits at 4.3 mbd currently (over 5 mbd prior to the attacks)

• Investors are not too sure Saudi Arabia claims are legitimate as satellite data still hints at major struggles with restoring previous output levels

• Speculative positioning on oil barely changed in the previous week

Saudi Arabia has significant oil stockpiles, that would last for around 30 days in case the production was fully halted. Spare capacity of Saudi refineries amounted to around 1.5 mbd before the attacks. Source: S&P Global Platts, JODI

Speculative positioning on oil barely changed in the previous week. Source: Bloomberg

Cocoa

• Indonesia has problems with cocoa supply. It has shifted from being a net exporter to being a net importer, hinting at rising demand in Asia

• Production in Ghana could be low for another year in a row. Some estimates hint at output falling below 800k tonnes. Production reached 830k tonnes in the current season

• Cocoa prices remain high in spite of the latest revision to total production forecasts. Estimates for the current season were raised from 4.651 million tonnes to 4.849 million tonnes

• Number of short positions is falling but from an extremely high level. Number of long positions is rebounding

Slight oversupply during the two previous seasons hints at potential supply problems in case demand continues to rise rapidly. Source: ICCO

Speculative positioning on cocoa reached inflection point suggesting that rally may last longer. Source: Bloomberg

Corn

• Rebound on the corn market eases after Chinese delegations dropped plans to visit farms in Montana

• Stellar season in Brazil. Situation in international trade and cheap Brazilian real boosts exports outlook for the South American country

• Significant divergence between soybean and corn prices in the short-term

• US corn crop quality and harvest progress for the current season is way below 5-year averages as well as data for the previous season

Brazil can be considered a threat to the US corn exports. Nevertheless, in case Sino-US relationship improves, US exports perspective may improve and demand for US corn may surface. Source: Bloomberg

A long-term correlation between corn ending stocks and price can be spotted. Poor crop quality may cause estimates of ending stock in the following seasons to decrease. Source: Bloomberg

Corn seems to be undervalued in comparison to soybean. Source: xStation5