Gold prices steady, set for best year since 2010

Gold prices were steady on Tuesday, holding below a more than two-month peak hit in the previous session, as weakness in the dollar countered optimism about the United States and China signing an interim trade deal soon.

FUNDAMENTALS

Spot gold was little changed at $1,515.23 per ounce by 0044 GMT. Prices hit their highest since Oct. 25 at $1,516.20 in the previous session. U.S. gold futures were unchanged at $1,518.30.

Gold prices are set to post their best year since 2010, having gained about 18%, mainly driven by a tariff war between the world's two largest economies and quantitative easing by major central banks.

The dollar edged lower against a basket of rivals, making gold cheaper for holders of other currencies. On Friday, the index suffered its biggest one-day fall since March.

The White House's trade adviser said on Monday the U.S.-China Phase 1 deal would be signed next week, but said confirmation would come from President Donald Trump or the U.S. Trade Representative.

The South China Morning Post reported on Monday Chinese Vice Premier Liu He would visit Washington this week to sign the deal.

Speculators raised their bullish positions in COMEX gold contracts in the week to Dec. 24.

China's net gold imports via Hong Kong in November plunged 72% from the previous month to their lowest in nearly nine years, data from the Hong Kong Census and Statistics Department showed on Monday.

Among other precious metals, silver rose 0.1% to$17.93 per ounce, while platinum gained 0.4% to $961.27 and palladium edged up 0.1% at $1,907.66 per ounce.

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Cotton trading range for the day is 18720-19300

Cotton on MCX settled down by -1.04% at 18950 due to improved sowing, higher imports and weak international prices. CCI procured 13.78 lakh bales in total across India, buying the large quantity of 8 lakh bales from Telangana followed by 2.2 lakh bales from Punjab, Haryana and Rajasthan. Around 1.82 lakh bales were procured from Maharashtra, 71,500 bales from Gujarat and the minimum purchases of 23,000 bales were reported from Andhra Pradesh.

Trading Idea for the day

* Cotton trading range for the day is 18720-19300.

* Cotton prices dropped due to improved sowing, higher imports and weak international prices.

* CCI procured 13.78 lakh bales in total across India, buying the large quantity of 8 lakh bales from Telangana

* The cotton arrivals from all over India stood approximately 72.3 lakh bales this season so far.

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Punjab heads towards record production of cotton

Punjab is expected to see a record production of cotton this year at 18.20 lakh bales against last year's 12.23 lakh bales, state agriculture officials said on Thursday.

With this, an average production per acre crossed the 10 quintals per acre mark. Last year there was an average production of 9.31 quintals per acre.

Chief Minister Amarinder Singh has congratulated the farmers, especially from the Malwa belt, for record production of cotton, while directing the Agriculture Department to ensure timely advance support for the cotton growers for the next Kharif season.

He lauded the efforts of the Agriculture Department, especially the field staff, in motivating the farmers to shift to cotton cultivation, as part of the state government's crop diversification focus.

These efforts translated into increase in the area under cotton cultivation from 6.70 lakh acres last year to 9.80 lakh acres during this year, an official spokesperson told IANS.

Timely intervention by the Cotton Corporation of India, on the initiative on the Chief Minister has for far led to the purchase of 4.36 lakh quintals of cotton, which is about 20 per cent of the total arrival of the produce in the market.

Agriculture Secretary K.S. Pannu said the favourable climate had also contributed to the bumper production of the 'white gold' and the introduction of drip irrigation helped boost yield and lower cost of cultivation.

The decline in cost of production due to decreased use of pesticides had also proved beneficial for the farmers, he added.

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Lower cotton prices to ease pain for mills hit by weak yarn exports

The new cotton season from October 2019 to September 2020 ushers in hope of lower raw material costs for yarn mills. This could give a leg-up to profitability in the coming quarters amid weak exports.

Cotton Corporation of India estimates production to rise 13.6% year-on-year. Therefore, current cotton prices (Sankar-6 grade) are down 8% since September and 16% lower from the high of ₹129 per kg touched in April.

However, analysts reckon that mills would benefit from this drop in prices with a lag. Most of them are saddled with high-price cotton inventory, which eroded profitability in the last two- three quarters. “The spinning industry saw disruptions in production in Q2FY20 owing to reduced demand and volatility in cotton prices," said a recent report by India Ratings and Research Ltd.

Larger mills such as Ambika Cotton Mills Ltd, KPR Mill Ltd and Vardhman Textiles Ltd maintained operating margins at about 16-18%, but many small units faced high cotton prices. Shares of Vardhman Textiles and Ambika Cotton Mills have fallen 17% and 28%, respectively, in a year, while KPR Mill’s share price was buoyed by a recent buyback offer.

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Cotton trading range for the day is 19030-19510

Cotton on MCX settled up 0.31% at 19290 on short covering after prices dropped due to improved sowing, higher imports and weak international prices. USDA lowered India's 2019-20 cotton crop to 300 bales (each bale of 480 pounds) down 5 lakh bales it projected in October due to adverse weather conditions in some states However, the crop is higher than 2018-19 when pest attack in Maharashtra and Telangana and erratic rains in Gujarat hit yield.

Trading Idea for the day

* Cotton trading range for the day is 19030-19510.

* Cotton gained on short covering after prices dropped due to improved sowing, higher imports and weak international prices.

* However, the crop is higher than 2018-19 when pest attack in Maharashtra and Telangana and erratic rains in Gujarat hit yield.

* USDA hiked India's 2019-20 cotton import numbers to 18 lakh bales from last month's estimates of 16 lakh bales.

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