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Commodities Briefing 19.Sep 2014

Posted on 19 September 2014 by VRS |  Email |Print

Global trade remains a key economic indicator, but don’t believe everything you read. The economy is recovering, Right? Look at the latest government data, and it’s not entirely clear. The Labor Department in September reported disappointing growth in employment, but other surveys for the same period said the labor market was strong.
Similarly, GDP declined an alarming 2% in the first quarter, but the report was so full of statistical noise that the market mostly ignored it. In the following quarter it beat estimates, but no one’s exactly sure whether that’s because of genuine economic gains or something else—for example, the weather improved……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

Labeling importers in Asia Pacific as keen buyers of commodities, especially crude oil and natural gas, is right on the money and somewhat unremarkable. Emerging markets are all about development and growth plans needing materials and fueled largely by hydrocarbons.
Purchasing power of commercial buyers always matters, but what I encountered on back-to-back visits to Hong Kong, Shanghai and Tokyo, earlier this month was the indisputable clout of those seeking minerals and materials. This palpable shift in power from West to East has gone well beyond setting prices and is inevitably extending to dictating terms and rules of engagement in the physical commodities market……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

Overall, we are looking for higher global economic growth next year - however, recently worries have emerged that economic growth in China is slowing down. In turn, the acceleration of growth expected in Q3 has failed to materialise and we could see a further decline in growth in Q4.
However, we expect the Chinese government and central bank to keep growth stable next year. Besides the renewed focus on the risk of lower growth in China, the main factor driving commodity markets currently is abundant supplies, in particular in the global energy and grain market. Overall, we expect commodity markets to remain well supplied in 2015. However, low prices may begin to be an issue for producers as they take their toll on profits……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

The commodities market started the year like a rocket. Since July it has lost almost all its gains. Like the market I started the year bullish on precious metals stocks. I turned defensive in June. I have since turned more bearish and am net short gold and silver stocks.
The commodity complex is in free fall. Agriculture products are falling out of bed. Metals are moving to yearly lows. Even copper has broken down which is the best gauge of world growth……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

A reduction in OPEC crude output deepened as Libya’s biggest producing oilfield stopped pumping amid supply cuts from Saudi Arabia and potential disruptions to Nigerian exports. Libya halted the Sharara oilfield as a precaution after a rocket attack on the connected Zawiya refinery three days ago, closing down about 30 percent of national output.
In Africa’s largest oil producer, state-owned Nigerian National Petroleum Corp. was in talks yesterday to prevent a strike that threatened to disrupt exports. Saudi Arabia told the Organization of Petroleum Exporting Countries that in August it made the deepest production cut in 18 months……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

Big oil companies and traders are stashing millions of barrels of crude on massive tankers bobbing in the ocean, in a bid to profit from a quirk in oil markets. Instead of moving crude from one port to another, a growing number of tankers are serving as floating warehouses for companies including Sinopec Ltd. and Vitol Group, according to people with knowledge of their operations.
Other companies such as Mercuria Energy Group are using the tankers to haul crude to on-shore storage facilities, these people said. In a rare split, crude is cheaper in the spot market than in the futures market, where bets are made on where prices will be in the months ahead. By buying physical stocks of oil and immediately selling futures, traders can lock in a profit……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

Falling oil prices may prove the best medicine for economies in the Arab world, rebalancing growth toward countries struggling to recover from the Arab Spring uprisings without doing major damage to the oil exporters of the Gulf.
The price of Brent crude has sunk by nearly $20 from its June peak to as low as $96 a barrel in recent weeks, its lowest level since mid-2012. Behind the drop is soft economic data from top consumers such as China; a plentiful supply outlook points to further price declines in the next two years. It is potentially the biggest shift for the Gulf Arab economies since the global financial crisis five years ago. But the huge financial reserves that they have built since then mean they are likely to cope fairly comfortably with cheaper oil……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

China will give foreign investors direct access to its gold market for the first time today as the biggest-consuming nation seeks to exert more influence over prices while boosting the yuan’s global use.
The Shanghai Gold Exchange will start trading contracts in the city’s free-trade zone that will be linked to its domestic spot market and available to about 40 international members including Goldman Sachs Group Inc. and UBS AG. Access was previously limited to some Chinese units. Gold in China this year cost as much as $31 an ounce more and $42 less than the London spot price, according to data compiled by Bloomberg……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

The Shanghai Gold Exchange officially launched its international trading platform in the city’s free-trade zone (FTZ) last night, the first such board in the zone, with hopes of setting benchmark prices for the precious metal in Asia. It could pave the way for the launch of crude oil futures and other key commodities including iron ore in the testing ground for mainland economic reform.
Premier Li Keqiang made an inspection tour of the 28 square kilometre zone yesterday following a no-show on September 29 last year, when it was inaugurated. “The free-trade zone in Shanghai will have a brighter future and Shanghai will have a brighter future,” the premier told officials and others during the tour, Xinhua reported. “I wish the FTZ to be prosperous and developed.”…………………………………….Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

Goldcorp Inc., the Canadian producer starting up three new mines to boost output 50 percent, says there’s such a thing as too much gold. The largest producer by market value, which expects annual output to reach as much as 4 million ounces by 2016, would prefer to fine-tune its mining assets to increase profitability than just keep growing to a point where it’s difficult to replace reserves, Chief Executive Officer Chuck Jeannes said.
“That means constantly trying to add high-quality things and, as we do that, dispose of the non-core things,” Jeannes said in an interview this week at the annual Denver Gold Forum. “We don’t want to be 7 or 8 million ounces.”…………………………………….Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

For all the anticipation surrounding the delivery of the Fed’s statement in the run-up to the September meetings, not much has changed. Ms. Yellen seemed to sound as dovish as ever and she played down the threat of any chasm emerging between FOMC participants. The market continues to feel that the Fed will be forced into raising interest rates sooner-rather-than-later, which is keeping a bullish trend intact for the U.S. dollar.
It is generally trading higher against most major alternatives with the exception of the British pound as the Scots go to the polls to determine whether they should remain part of the 307-year old Union. In the current environment, even as the Fed holds a steady hand on the wheel, commodity prices are suffering. Gold prices are fading in response to the manner in which bond traders sense the Fed will have to throw the towel in on holding rates steady……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

Barclays on Wednesday lowered its price forecast for gold, citing “an increasingly bearish macro backdrop developing for gold,” while raising its outlook for palladium. “Rising rates and a significantly stronger dollar present headwinds, which are set to overwhelm any seasonal strength in physical demand this year,” the bank said.
Barclays lowered their fourth-quarter average gold price forecast to $1,220 an ounce. They now expect prices to average $1,270 an ounce in 2014. Their 2015 forecast calls for an average gold price of $1,180. Palladium’s “sizable” deficit “will likely overpower the downside risk presented by a weaker gold price and a stronger dollar and reinforce the longer-term support for prices,” Barclays said……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

The palladium market is poised to deliver a record deficit this year and the market is likely to remain in deficit next to the magnitude of 811koz, according to a Barclays report. The prices are likely to average $850/oz in the final quarter of this year and $890/oz next year, the report said.
The report says price correction is likely to be short-lived for palladium for three reasons. First, despite the largest daily ETP outflow, prices have remained resilient. Second, Russian shipments into Switzerland have eased again after the pickup earlier in the year. Third, underlying auto demand looks robust……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

Subsidies accounted for four-fifths of the profits reported by Chinese steel companies in the first half of this year, a dramatic increase in reliance on state support that illustrates starkly the industrial weakness that is an increasing drag on the economy.
The headwinds faced by China’s massive steel sector - falling profit margins and growing dependence on handouts - are shared by other key industrial and infrastructure-related sectors, including aluminium, cement and coal. A Reuters analysis of first-half financial statements from 77 listed Chinese steel, aluminium and cement companies revealed a sharp deterioration in profitability……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

Buyers of exchange-traded products backed by silver are betting $11.9 billion that big speculators are wrong about the outlook for prices, which slumped today to a 14-month low.
ETP holdings are up 1.5 percent since mid-July to 19,898.8 metric tons, nearing a record reached in October, data compiled by Bloomberg show. At the same time, money managers shrank bullish wagers by 95 percent, government data show. To protect against the risk of lower prices, producer Coeur Mining Inc. (CDE) has hedged about a third of its output……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

Charles Schwab (SCHW) said that it has added 65 exchange-traded funds to Schwab ETF OneSource. This brings the total number of ETFs on the platform to 182, all of which trade online without commissions. New ETF providers to OneSource are ALPS, Direxion Investments, Global X Funds, IndexIQ, PIMCO, ProShares and WisdomTree. They are bringing a total of 28 new funds.
Existing providers, such as ETF Securities, Guggenheim Investments, PowerShares, State Street SPDR, United States Commodity Funds and Charles Schwab Investment Management are adding 37 ETFs to the platform. “We know that every dollar counts for investors – and trading commissions can really add up, so they are crucial when evaluating the total cost of an ETF,” said Heather Fischer, Schwab’s vice president of ETF Platform Management, in a press release……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

As noted earlier, Scotland went to the poll today to vote on its independence, a possibility that has been disrupting investment in the region. Although the polls don’t close for another half hour, the market at least has cast a vote, sending ETFs related to the U.K. up. The Guggenheim Currency Shares British Pound Sterling Trust (FXB) ended the day ahead 0.6%.
Plenty of speculation has surrounded the future of the pound should Scotland split from England—some have suggested the Scots adopt Bitcoin as their currency……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

The real fell to a seven-month low a day after the U.S. Federal Reserve supported the dollar by raising its forecast for interest rates as investors awaited the results of a new Brazilian presidential poll.
The currency declined 0.3 percent to 2.3649, the weakest level on a closing basis since Feb. 20. Swap rates, a gauge of expectations for changes in borrowing costs, rose 10 basis points, or 0.10 percentage point, to 11.63 percent on the contract due in January 2016……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

Economists and policymakers frequently talk about the “social cost of carbon”—the price that society as a whole pays for disruptions caused by climate change and ocean acidification. Although there are various ways of calculating it that give different results, the US currently estimates the cost at $37 a ton. At least nationally, however, there have been no attempts to get anyone to actually pay this price for their emissions.
But locally, a number of states are trying. Most of the Northeast has banded together to form the Regional Greenhouse Gas Initiative, or RGGI. This is a cap-and-trade system, where emissions allowances are auctioned by the group……………………………………..Full Article: Source

Posted on 19 September 2014 by VRS |  Email |Print

The B.C. government is resuming the buying of carbon offsets, a little over a year after it announced it would dissolve the controversial Pacific Carbon Trust. The B.C. government issued a procurement call September 11 to fund private enterprise projects that reduce greenhouse gas emissions through carbon offsets.
Under the program, the government will invest in projects, like tree planting or fuel switching, if the proponent can demonstrate they will reduce greenhouse gases. “B.C.’s carbon neutral government successes have shown that offset projects provide a cost-effective approach to meeting the province’s GHG reduction targets while supporting innovation for new, clean technologies,” B.C. Environment Minister Mary Polak said……………………………………..Full Article: Source

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