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Commodities Briefing 29.Jul 2015

Posted on 29 July 2015 by VRS |  Email |Print

Investors’ expectations are for more falls in commodity prices amid worries about the Chinese economy and interest rates. Speculators have confirmed what everyone else has been thinking: expect more falls in commodities, as worries about China and higher interest rates combine with waning sentiment to suggest markets are heading further south.
But while more losses are certain, their scope could be limited because many speculators have already made bets that prices will fall. Commodities from iron ore, to oil, grains and gold have shed value as the current extended price boom or “super-cycle” wanes………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

The Silk Road may conjure up images of Marco Polo and ancient Chinese empires, but its infrastructure-driven 21st century version could be a long-term saviour for commodity prices. China’s plan to spend billions on transportation links to Europe via western Asia - primarily railways and highways but also ports - is finally underway and starting to attract international attention.
“The Silk Road initiative announced by Chinese President Xi Jinping in 2013 and implemented, beginning this year, contemplates so vast an investment in highways, ports and railways that it will transform the ancient Silk Road into a ribbon of gold for the surrounding countries,” said Yale Professor Valerie Hansen, writing in The Indian Express earlier this month………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

Concerns about a slowdown in China, renewed strength in the US dollar and persistent supply concerns have combined to make it an ugly July for commodities. But just how bad has it been? The S&P GSCI total return index, which tracks the price of 24 commodities, has fallen through the bottom it reached during the the financial crisis and is at its lowest level since February 2002, writes Mamta Badkar.
Its 13.6 per cent decline this month makes July the seventh worst month on record for the index which dates back to 1970, according to data from S&P Dow Jones Indices. All of the 24 commodities in the index are down for the month, with the exception of lean hogs. Losses for the commodities in the index have only been so widespread once before - in September 2008………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

As the Fed headed into its two-day meeting, former Richmond Fed President Al Broaddus said Tuesday it’s a “very close call” on whether policymakers will decide to increase interest rates for the first time in nine years in September or December.
“I think the expectation right now probably has to be December,” he told CNBC’s “Squawk Box”—though he personally would like to see a September hike. “I think they’d like to get on with it. And they should get on with it.” The motivation behind his urgency has nothing to do with worries about a “big bulge” in inflation around the corner, said Broaddus. “I’d just like to see us get it off the table. … It’s a distraction.”……………………………………….Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

China’s crashing stock market and the meltdown in the metals market may be getting all the attention lately, but crude oil is quietly crumbling once again. Oil has plunged nearly 20% this month alone and it briefly dipped below $47 a barrel on Tuesday. That leaves it flirting with the March lows, which was the weakest price since 2009.
The latest selling has been fueled by the same dynamics that caused oil to tumble from $100 last summer. The American energy revolution has created a massive supply glut and the tepid global economy is depressing demand growth………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

Oil prices are experiencing a “double dip” and could extend losses as the supply glut persists for another 18 months, according to Bank of America Corp. Risks to growth in China, the prospect of increased Iranian exports after this month’s nuclear deal and a strengthening dollar “could continue to press oil lower,” the bank said in a note dated July 24. Bank of America cut its third-quarter estimate for Brent to US$50 a barrel from US$54, while West Texas Intermediate was lowered to US$45 from US$50.
Brent and WTI returned to bear markets in the past week after falling 20 per cent from peaks reached in June, as a plunge in China’s stock market sparked concern that oil demand in the world’s second-largest economy will falter. Brent traded close to US$53 a barrel on Tuesday and WTI near US$47………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

Don’t let tumbling oil prices darken your outlook on stocks or the economy. Yes, U.S. crude prices have dropped into an official bear market, down around 20% since the beginning of June, which will undoubtedly hurt the oil industry and companies like Exxon Mobil (XOM) and BP (BP).
But there are a number of benefits from the decline. Here are 10 of them: Stocks Tend to Rally After Oil Price Drops. When the price of oil goes down, stocks tend to surge. That’s the conclusion of a study published in The Journal of Financial Economics in 2008 by professors Gerben Driesprong, Ben Jacobsen, and Benjamin Maat. They found that when oil prices moved down one standard deviation (that’s a price movement of about 11%) then stocks would rally by 1% the next month………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

The gold price will average $1,135 per ounce in the third quarter of this year, GFMS said in its latest Gold Survey report, and $1,175 in the fourth quarter. This compares to a second quarter average of $1,192 per ounce and current spot gold price of $1,095.
The third quarter is widely expected to see the first increase to US interest rates since 2008. Higher interest rates in theory would push many gold investors into more yield-bearing assets such as bonds. GFMS on the other hand believes that much of the action has already been priced into gold, and that the first increase will in actual fact push the metal’s price higher………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

Demand for gold fell to its weakest level since 2009 in the second quarter, as Chinese buyers shunned purchases, the metals consultant GFMS said. “Almost all major physical gold markets suffered in the second quarter,” the London-based research firm, a unit of Thomson Reuters, said Tuesday in commentary published with its latest GFMS Gold Survey.
Physical gold demand fell 14% from a year ago, with demand for bars and coins falling 12%, and demand for jewelry declining 9%, it said. The decline in consumption came despite a 7.5% fall in average U.S. dollar gold prices. A cheaper dollar makes it more affordable for people with other currencies to buy gold………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

World gold demand hit a six-year low in the April-June quarter of the current calendar year on weak demand from China. A survey conducted by global research firm Thomson Reuters GFMS showed that the world gold demand nose-dived 14 per cent during April-June 2015 at 858 tonnes compared with 1,000 tonnes in the corresponding quarter last year.
Gold demand in the April-June 2015 quarter showed a decline of 15 per cent from the previous quarter. Jewellery consumption in India rose 2.5 per cent year-on-year (y-o-y) to 158 tonnes. Retail investment was steady y-o-y at 50 tonnes. However, it surged from the first quarter on buying related to Akshaya Tritiya………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

HSBC has significantly downgraded its 2015 average gold price forecast, following the brutal sell-off seen in the market one week ago. HSBC now predicts that gold will average $1,160 per ounce in 2015 from $1,234 previously. The bank has also lowered its 2016 forecast by five percent from $1,275 per ounce to $1,205.
Nonetheless, the bank still believes that in the end, gold will recover from current levels, it said. Gold recently slumped to levels not seen since March 2009 at $1,077 per ounce, following a bear-raid on the market during early trading hours in Asia and what was the most illiquid period of business in the week. ……………………………………….Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

Copper futures gained the most in two weeks on concern that power restrictions in Zambia will cut supplies there and have ripple effects at global mines. First Quantum Minerals Ltd. said on Monday that Zambia’s state-run power company declared force majeure for supply of electricity to its Kansanshi operation.
The power cut could lower copper output in the second half of the year, and also threatens the company’s progress at its Cobre Panama project in Latin America because of a potential liquidity squeeze, Greg Barnes, a Toronto-based analyst at TD Securities Inc., said in a report on Tuesday. Copper is rebounding after touching a six-year low on Monday as slowing demand in China increased concerns over a glut………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

Delicately stated, these are not the best of days for commodities and the corresponding exchange traded products. With a July loss of 13.6%, the S&P GSCI Total Return Index now resides at its lowest levels since late February 2002.
Not surprisingly, investors are scampering away from some well-know commodities ETFs. For example, the SPDR Gold Shares (NYSEArca: GLD) has bled $1.12 billion in assets this month. Last Friday, GLD and the iShares Gold Trust (NYSEArca: IAU) lost over $302 million in combined assets………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

Hedge funds are on track to deliver solid returns in July, up 1.4% month to date (0.4% of as end July 21). CTAs and global macro managers outperformed other hedge fund strategies, said Lyxor Asset Management.
In its Weekly Briefing, Lyxor said that CTAs bounced back last week, recouping part of the losses generated earlier this year. They benefited from their sizeable short positions in precious metals and energy as gold and energy prices dropped. Fixed income and equity buckets added to the gains, albeit to a lesser extent as CTA managers recently cut the risk on both asset classes………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

Wells Fargo & Co.’s wealth management division is soliciting investor money for a new commodities hedge fund just as oil hovers near a six-year low and other commodities prices slide to their worst levels since 2002.
The Apollo Natural Resources II ASP Fund has already raised about $7 million and is looking for wealthy individuals who can afford the minimum $100,000 entry investment, according to a July 16 securities filing………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

Emerging-market currencies have slumped to 15-year lows as China’s equity rout and free-falling commodity prices reverberate throughout the global economy. Raw-material exporters Brazil, Russia and Colombia have suffered some of the heaviest sell-offs as falls in the price of commodities such as oil, copper and iron ore continued unabated this week, with Brent crude falling to its lowest level since February.
The turbulence is expected to increase once the US Federal Reserve chooses finally to increase interest rates from near-zero levels, a move which will probably have a chilling effect on developing markets. James Lord, emerging market strategist at Morgan Stanley, said the Fed was an “ever-present risk………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

The U.S. dollar is getting too strong for some countries. Early warning signs suggest another emerging markets currency crisis. Brazil’s currency, the real, hit a 12-year low Monday. Currencies in Southeast Asia are at their worst points since the region’s last financial crisis in the late 1990s. Mexico and South Africa’s exchange rates are at their lowest levels ever compared to the dollar, according to Capital Economics.
The dollar’s gains should make history nerds shake in their boots. Its rally in the early 1980s helped trigger Latin America’s debt crisis. Fifteen years later, the greenback surged quickly again, causing Southeast Asian economies, such as Thailand, to collapse after a run on the banks ensued………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

The State Power Investment Corporation, one of China’s big five state power producers, signed a deal with the municipal government of Jiuquan on Tuesday to develop carbon credits from the city’s wind and solar power plants.
The partnership, the first of its kind, will give the state-owned company the opportunity either to buy carbon credits generated by local renewable energy projects or sell them to other market participants. The city of Jiuquan, home of some of China’s largest wind and solar power plants, will offer the credits generated by 23 solar power projects in a single package………………………………………..Full Article: Source

Posted on 29 July 2015 by VRS |  Email |Print

Only 21% of voters polled believe that the carbon price had a large impact on power prices and just 9% thought the repeal had pushed prices down. More than 60% of voters think the former Labor government’s carbon price had no effect, or only a small effect, on electricity bills – as the Abbott government tries to rerun its cost of living argument against Labor’s pledge to reintroduce an emissions trading scheme.
Only 21% of voters (30% of Liberal/National voters and 15% of Labor and Green voters) believe the carbon price had a big impact on electricity prices, according to the latest poll by Essential Media………………………………………..Full Article: Source

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