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Commodities Briefing 16.Apr 2015

Posted on 16 April 2015 by VRS |  Email |Print

The risks to global financial stability have risen, the International Monetary Fund (IMF) has said. In a new report, the IMF says that countries that export oil and other commodities have been severely affected. Some emerging economies have been hit by sharp moves in the global currency markets.
And the report says financial stability is still not “fully grounded” in the rich countries. “Risks to the global financial system have risen since October and have rotated to parts of the financial system where they are harder to assess and harder to address,” said Jose Vinals, financial counsellor at the IMF………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

It used to be a fairly safe bet that weak Chinese growth numbers would spark government stimulus measures, thereby boosting commodity import demand and prices. While the soft first quarter gross domestic product (GDP) numbers may well result in a relaxation of monetary policy and measures to boost infrastructure spending, it’s also likely that commodity volumes and prices won’t respond much.
GDP rose 7 percent year-on-year in the first quarter, in line with forecasts but still the slowest rate in six years. But in many ways China doesn’t really look like an economy growing at 7 percent, with exports plunging in March, power generation dropping 3.7 percent, the biggest fall since 2008, and a host of other indicators pointing to sluggish growth………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

The unimaginable has happened: Oil prices have dropped to less than $50 a barrel in recent trading days. Of all the oil-producing countries in the world, it seems like Russia took the biggest hit, with its economy largely reliant on the world’s most vital commodities—metals, energy, and agriculture.
Russia is regarded as one of the world’s leading producers of minerals. In fact, the country ranks first in the production of chromium, nickel, and palladium. Russia’s Norilsk Nickel remains to be the top nickel and palladium mining smelting company in the world, as well as one of the top ten copper producers………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

In a new report, analysts at Citi Research looked at the slumping commodity market and updated their forecast for 2Q15 and beyond. One of the topics that analysts addressed is whether or not the worst of the slump is over or if there is downside remaining in oil and other commodities.
Analysts believe that many commodities have found near-term support at current levels, but that this support could be short-lived. The center of the collapse in commodity prices is crude oil, and Citi analysts to not feel that crude oil has bottomed just yet. According to the report, demand for crude oil will be seasonably low in Q2 due to refinery turnarounds. In addition, investment outflows from physically-backed crude oil ETFs will likely push crude prices lower………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

Countries that fail to pass on steep declines in global oil prices to consumers could cost the world half a per cent in economic growth next year, according to the International Monetary Fund. Modelling by the IMF in its April World Economic Outlook report predicts GDP growth of 3.5 per cent this year and 3.8 per cent next year.
The report shows the oil slump could boost GDP in 2016 by 1 per cent, excluding nations that are increasing their oil supply. But that assumes a complete “pass-through” of the low prices. Countries such as Russia, India, China and Brazil, which manage their oil prices, would halve the 1 per cent gain by using the oil windfall to prop up their nations’ finances instead………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

Oil peaked above $56 for the first time in 2015 on Wednesday. It’s the fifth straight day the price for a barrel of oil has nudged up. Investors are cheering and buying energy stocks while American drivers are cringing at the prospect of higher costs at the pump.
Consumers have loved low gas prices this year. The average gallon of gas costs a mere $2.39. That’s way below the average a year ago, $3.63, according to AAA, although it’s off the rock bottom levels of $2 a gallon that many Americans saw around the New Year………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

The prospect of Iranian crude oil flooding the market and Saudi Arabia pumping at near-record levels could delay a recovery in an oil market slammed by a historic price collapse, the International Energy Agency said.
The IEA, which tracks oil data for Western countries, and others have predicted that the world’s supply of oil would fall back in line with demand starting from the second half of this year, when U.S. producers are expected to begin cutting back production because of low prices………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

Saudi Arabia pumped close to a record amount of crude oil last month, leading the biggest surge in OPEC output in almost four years just as the U.S. shale boom shows signs of slowing, the International Energy Agency said.
The Organization of Petroleum Exporting Countries may extend its biggest output gain since June 2011 into next month as recovery in Libya and Iraq adds to the Saudi increase, the IEA said. Average U.S. oil production of 12.6 million barrels a day in the first six months of 2015 will slide to 12.5 million by the fourth quarter as companies curb drilling, the agency said………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

Russia is conducting “unprecedentedly active” consultations with the Organization of the Petroleum Exporting Countries but isn’t discussing oil production cuts to support prices, Russian officials said on Wednesday.
The consultations come after several months of low oil prices that are putting pressure on Russia’s budget and currency, but Russian officials poured cold water on any suggestion of coordinated production cuts………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

Asia can surpass Europe as the centre of gold trading, Intercontinental Exchange’s John Ho told delegates at the Dubai Precious Metals Conference, with Dubai potentially integral to this shift. “People believe that the Asian time has come, that trading in Asia is now and it needs to happen in an Asian time zone,” he said. “Europe is over, Asia is now.”
Ho, director of Asia Pacific at ICE, was speaking ahead of the exchange’s launch of a Singapore-based, physically settled kilobar gold futures contract. Although Dubai can become part of this key movement of gold from West to East given its strategic location between Europe and Asia, any hub requires trust before it can succeed, he warned………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

Bank of America Merrill Lynch (BofAML) analysts believe the worst may be over for gold. According to a recent report, they see gold reaching $1,500/oz. by 2017. At the same time, a global BofAML survey revealed concerns of overvaluation in the equity and bond markets. A press release on the survey reads: “Bonds Seen as Most Overvalued in Survey’s History”
The issue of the Federal Reserve raising interest rates has been pressuring gold, but BofAML analysts believe gold will prevail: “We believe the upcoming Fed rate hike is the only major obstacle to sustained price rises.” They do expect the Fed to raise interest rates, but not sharply, and think gold may have already seen the worst of it: “While a normalization in rates is likely, aggressive rate hikes are not our base case, which is a reason we believe the worst may be over for goldafter the dreadful price collapse in 2013 and muted price movements in 2014.” [emphasis added]……………………………………….Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

Renowned financial analysts and trends forecaster Martin Armstrong has said that gold will “probably max out at $5,000 per ounce” as “people lose confidence in government” and that we will see riots and unrest globally in the coming months – the fall of this year.
It a very interesting interview with Greg Hunter of the excellent USAWatchdog.com, Armstrong says: “Gold rises when people lose confidence in government. It has nothing to do with inflation. So, when you start to worry about government is not going to survive or who’s going to win, that’s when gold rises. Short term, we still have the risk of it going under $1,000 per ounce. It’s going to flip when everything is right. It will probably max out at $5,000 per ounce.”……………………………………….Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

New study shows Greek bond yields as proxy for euro-zone break-up risk is more reliable than the strength of the US dollar in predicting the gold price. The real possibility of a Grexit is back on the cards. And with it a resurgent gold price.
New York gold futures moved back above the $1,200 an ounce level on Wednesday on news that Greece is preparing to declare a debt default by the end of April amid stalled negotiations with its international creditors………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

The Indian gold market is not expecting any fireworks in terms of premium business in 2015, with most participants downbeat, expecting premiums to trade in a tight range of $1-$2/oz above the dollar spot price, sources said this week.
One broker said that unless the dollar gold price dramatically drops $100-$150/oz, it is doubtful that premiums will move higher from the current range. He noted that Indian physical buyers have become too savvy and that as soon as the price in local currency terms dips, they are quick to buy. However, the local market has ample supply, so premiums see little reaction………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

Rising production and softer demand growth should see the copper market register a 399,000 mt surplus this year, up from a surplus of 316,000 mt in 2014, Thomson Reuters GFMS said Wednesday. “We do not expect a pick-up in prices of note until the latter half of 2015,” GFMS said in its Copper Survey 2015, though it added: “Wild cards remain and include supply-side surprises, with producers perhaps cutting back from planned targets, while China’s state stockpiler could be active again in the current year.”
GFMS is forecasting an average copper price for 2015 of $5,975/mt, a 12% drop from the previous year. Three-months copper closed London Metal Exchange floor trade at $5,950/mt on Tuesday………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

Copper prices have fallen YTD, despite significant production disruptions. This suggests that the commodity is on track to move into surplus and BofAML see prices fall below $5,000/t ($2.26/lb) next year. Copper has been the underperformer in the base metals complex since the beginning of 2014. This is heavily influenced by an unfolding switch in market balances from deficits to surpluses.
The challenging fundamental backdrop has also been reflected YTD, with copper falling by around 5% in 1Q15, despite close to 500kt of supply disruptions, equivalent to what we had allowed for the entire first half of 2015………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

Last year the ETF industry launched 10 currency-hedged exchanged traded funds, doubling the total number available, in time to maximize their potential against the falling yen and the euro. But some are now beginning to wonder if the strategy these ETFs follow has hit its sell-by date and the currency hedge is no longer needed.
“When the euro cost $1.40, no one believed that Europe would do a quantitative easing,” said Brent Schutte, senior investment strategist at Chicago’s BMO Global Asset Management, which has $271 billion under management. ……………………………………….Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

Investors and their advisers have been turning to exchange-traded funds over recent years thanks to their low-cost nature, Rachel Lord has claimed. The head of Europe, the Middle East and Africa for iShares – part of asset manager BlackRock – said that as the product gained more traction in the UK, it would not be long before the European ETF industry, including the UK, hit its milestone of £680bn (US$1trn) of assets under management.
Reasons for its growing popularity among investors, she said, included product innovation, more confidence in the market and the cost-effective nature of ETFs, which tend to have lower total expense ratios than actively managed funds………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

The low-risk, high-yield investment—it’s the Holy Grail of finance, or perhaps more aptly, the perpetual motion machine. One that rewards its holder out of proportion to the danger of holding it. But is there indeed such a thing as a vehicle that can combine the returns of a Lotto ticket with the safety of a Series I savings bond?
As a rule, the correlation between risk and reward in the market is almost perfectly positive. Common sense or a few seconds’ rumination should show you why that’s the case, but here’s an explanation anyway. The more people desire an investment because of its expected returns, the greater the demand, and thus the higher its price goes………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

Heartwood Investment Management has bought back into commodities after years of ignoring the sector. Its investment manager Jade Fu said he had not had any direct exposure to commodities, such as oil or gold, on his multi-asset portfolios for more than two years.
Weaker-than-expected demand, a surge of the supply of some commodities and a strong dollar have dragged down prices across the sector. Ms Fu said these fundamental factors were still present and meant the asset class “remains weak”. But she said: “We are beginning to see tentative signs of stabilisation across a number of sectors, particularly in energy, and we consider that now is the time to gain an entry point into the asset class.”……………………………………….Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

The US dollar remains the best bet in currency markets this year as the Federal Reserve splits from global peers and moves closer to raising interest rates, according to BNP Paribas.
“It is still a dollar-bull story, in spite of the fact that the economic data in the US has softened,” Robert McAdie, head of research and strategy at BNP Paribas, said in New York on Wednesday. “You have a global environment in which other central banks are trying to keep their currencies competitive, and they’re going to cut.”……………………………………….Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

A Stanford professor claims to have invented a Bitcoin-like system that can handle payments faster and with more security. The total value of the digital currency Bitcoin is now approximately $3.4 billion, and many companies and investors are working to prove that the technology can make financial services cheaper and more useful.
But Stanford professor David Mazières thinks he has a faster, more flexible, and more secure alternative. If Mazières is correct, his technology could make digital payments and other transactions cheaper, safer, and easier—particularly across borders. He released the design for his system in a white paper last Wednesday………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

At a forum held in Wuhan in central China’s Hubei province on April 8, China was said to be readying itself to kick off a national carbon trading market in 2016, with insiders estimating it will reach 100 billion yuan (US$16.1 billion) annually, an official in charge at the National Development and Reform Commission (NDRC) stated, according to Guangzhou’s Time Weekly.
The announcement coincided with a statement by the Ministry of Environmental Protection on March 30 on resuming a study on a green GDP to determine the environmental cost for economic development, as a prelude to pushing the development of green industries………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

When we embarked on our research into how trade groups are lobbying on EU climate policy, we knew trade associations were likely to be influential. However, we were surprised at just how important they are to companies, and how ferociously opposed some have been to recent progressive European Union climate policies.
These EU policies include attempts to strengthen the EU Emissions Trading Scheme, and targets on energy efficiency and renewable power. The policies and regulations put in place in Brussels matter to businesses. Some companies see the transition to a low-carbon society as a business opportunity, while others see it as a threat to their bottom line………………………………………..Full Article: Source

Posted on 16 April 2015 by VRS |  Email |Print

Odds are, your mobile phone is less than two years old. Today’s economy is built on a “fast turnover” principle. The faster we replace our gadgets the better – not only our phones, but most items we consume.
This leads to a staggering inefficiency in the way we manage the Earth’s resources, with increased pollution, loss of ecosystems and substantial losses of value with each product disposed. A new study from The Club of Rome, a global thinktank, highlights that moving to a circular economy by using and re-using, rather than using up, would yield multiple benefits………………………………………..Full Article: Source

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