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Commodities Briefing 03.Jul 2015

Posted on 03 July 2015 by VRS |  Email |Print

Divergence was the name of the game for commodities markets in the second quarter as gasoline and iron ore jumped but coffee and nickel plunged and money flowed into index investments and out of exchange traded funds. Led by crude, commodities enjoyed a strong start to the quarter but the rally fizzled out as oil prices moved sideways and the US dollar stabilised, bringing fundamentals such as supply and demand to the fore.
The S&P GSCI total returns index — which includes the gains or losses on rolling over positions and interest on collateral is up 9 per cent on the quarter with gasoline up 20 per cent and coffee down 25 per cent. “It has been a mixed bag for the asset class as a whole,” said Aakash Doshi, analyst at Citigroup in New York………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

The world’s biggest consumer of commodities is no longer just an insatiable buyer of everything from coal to gold. A richer, slower-growing and choosier China is becoming an exporter as well as importer. It is also using its clout to change the way commodities are traded, bringing markets closer to home and drawing up rules that suit its needs instead of those of producers and Western financiers.
This week, for example, Chinese regulators gave the go-ahead for foreigners to trade crude-oil futures in Shanghai. When that starts—probably by November—it will be the first time that outsiders have been allowed to buy and sell a listed Chinese futures contract. This is part of a clear plan to change the way commodities are traded, says Owain Johnson of the Dubai Mercantile Exchange (DME)………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

The big picture is that Australia is receiving less money for its commodity exports, with the value dropping 11 per cent to A$174 billion (US$133.8 billion) in the 2014-15 fiscal year. “New normal” is a term coined about China’s transition to slower but hopefully more sustainable economic growth, but it can be equally applied to many commodity markets.
This reality was well illustrated by the Australian government’s latest set of forecasts for the country’s commodity exports, which highlighted we are now in an era of low prices but strong volumes. Australia’s official forecasts carry weight because the country is the world’s largest exporter of iron ore and metallurgical coal, and will become number one in liquefied natural gas (LNG) within the next few years………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

Massive downward revisions to oil output in Brazil and Iraq have increased the risks for oil markets of going from the current feast to famine within just a few years, leading to a price spike that would give a new boost to the U.S. shale industry.
Brazil and Iraq had been expected to add over 2 million barrels per day to global supply by 2020 and another 2.5 million by 2025, becoming the two biggest contributors to help meet rising global demand, according to the long-term forecast of the International Energy Agency………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

The sleepiest oil market since 2013 will probably limp through the second half of the year as well. Crude traded in a $5 range in June, the narrowest in 19 months. Volume was the lowest since December and open interest - - the number of futures contracts outstanding — was the least since January.
New York-traded futures, which have swirled around $60 a barrel for the past two months, will average about $59 in third quarter and $63 in the fourth, according to forecasts of 22 analysts compiled by Bloomberg. Neither the potential return of Iranian crude to the market nor the long-anticipated decline in U.S. production is stirring a reaction………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

When we first started getting substantial oil from fracking and horizontal drilling, the news about costs indicated that oil production would decline at a fast rate when prices were low, pushing prices back up. New data, however, argue for rising productivity of shale oil development—meaning plenty of petroleum to keep prices low.
Price cycles vary widely across industries based on how much of total cost is up-front expense versus on-going expense, as I explained in the best book about economics for business. When costs are mostly front-loaded (oil, airlines, ocean shipping) and capital assets last a long time, then price cycles are volatile………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

The amount of rigs drilling for oil in the U.S. rose for the first time in seven months, triggering a slump in crude oil prices to their lowest settlement in two months. U.S. oil producers added 12 rigs last week, breaking 29 straight weeks of cuts, in response to prices that have rebound to- and stayed at $60 a barrel since late April.
That convinced producers to end months of massive cutbacks that started after the U.S. shale drilling boom flooded the market and sent prices crashing. But the increase in rigs is scaring investors and analysts who have warned that oil could be on the verge of another sharp fall. Production has kept making small gains even as drilling has declined and stockpiles have hit historic levels around the world………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

A bored security guard walks around the entrance hall of an unremarkable 11-storey building in downtown Shanghai, desperate to kill time. The receptionist, a young Chinese woman, is flopped across her desk, half-asleep. It’s a mid-June afternoon at the Shanghai Gold Exchange (SGE), China’s one-and-only trading platform for the yellow metal, but the place is not exactly bustling with activity.
“We are quite recent, nothing like the century-old exchanges of London and New York. All trading transactions here are handled electronically. That’s why it’s quiet,” said Yang Ming, one of the first employees at the SGE. The SGE’s Main Board, where Chinese domestic investors buy and sell gold, occupies four floors of the building………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

The heavy discount on physical gold remains intact across much of India this week while high inventories and dwindling demand continue to take their toll. Discounts are still averaging around $8 per ounce to the London spot price on .995 gold in Ahmedabad, a gateway for gold into Mumbai, although larger international dealers are still holding out for smaller discounts or even parity on some higher-quality brands, they said.
Large inventories have been amassed since late last year and a seasonal slowdown is in full effect, they added. The country has imported a sizeable volume of gold since the removal of the 80:20 legislation in November – around 63 tonnes in May, 81 tonnes in April and 125 tonnes in March. Sources suggest another 50-60 tonnes came in to India in June………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

There is too much bullishness among gold market timers, and that’s why the yellow metal has failed to respond to the macroeconomic factors that otherwise should have caused it to rally. Imagine being told a month ago how the Greek debt crisis would unfold over the next few weeks. If you knew then that the country would default on its debt, you probably would have forecast that gold would rally.
That’s because bullion is a safe haven in times of geopolitical and economic crisis, and Greece’s default threatens the economic stability of the entire eurozone. Another reason you’d have been bullish is that gold is an inflation hedge, and it would have been a good bet that, if Greece did default, the European Central Bank would flood the eurozone with monetary stimulus in an effort to keep the Greek crisis from spreading………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

The precious metal stays in trading range as Greece lives on the edge of default due to tepid inflation, muted demand for gold from China and a strong U.S. dollar. Despite some early noise to the contrary, Greece’s financial woes are having almost no impact on gold prices, so far.
It’s not that the threat of the first country in the developed world to default is not a big deal, it’s just that investors have been well warned, and there are a lot of other forces currently holding down the price of gold………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

With silver prices flat for the year, is silver a good investment to make right now? Silver has not performed nearly as well as its high-flying days of 2009-2011, when it quadrupled in price. But that doesn’t mean the metal doesn’t have value to your portfolio. Let’s delve into some relevant aspects of the silver market to determine whether now is a good time to invest in silver.
You can see the price bottoming around $15.25 in November, then after a spike to $19.25, dropping back to around $15.50 in March. We can also distinguish a rising trend channel that seems to be establishing itself (green lines). As for the 50-day moving average, it looks like it has stabilized, bouncing around the $16.50 level. Consider, though, that the 200-day moving average is still trending downward………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

While some commodity analysts have noted that the gold market hasn’t benefited from the ongoing Greek financial crisis as the price have continued to slide and remain near a three-week low, one analyst says it is important to shift your perspective .
Jessica Fung, commodity analyst at BMO Capital Markets, said that while gold hasn’t befitted from the crisis, it has helped support the market. She notes that gold is trading about $30 below the key psychological level of $1,200 an ounce. “That is really nothing,” she says. “You should look at it this way: if Europe wasn’t close to falling apart where would gold prices be right now?”……………………………………….Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

Precious metals had a volatile day – at the day’s lows they were down 0.9 percent on average, with silver off 1.7 percent at one stage, while they ended the day mixed with palladium up 0.9 percent, while gold, silver and platinum prices closed down 0.5 percent, with gold at $1,173.50.
Many of the base metals spiked lower on Tuesday; at the day’s lows prices were down an average of 3.9 percent, skewed by an 8.5 percent drop in nickel and a 6.9 percent drop in tin. The sell-offs turned into spikes with the complex closing down an average of 0.6 percent, with nickel closing the day up 1.8 percent, while tin closed off 3.3 percent………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

Iron ore suffered its biggest one day percentage drop since March, falling by more than 5 per cent, as shipments of the steelmaking ingredient heading to China continued to pick-up. Iron ore was one of the top performing commodities in the second quarter rising more than 20 per cent. One trigger for the rally was a late buying spree by Chinese steel producers ahead of the peak summer demand period. But another factor was lower than expected volumes from Australia.
Analysts believe a prolonged wet season in the Pilbara region of Western Australia affected output, in particular at mines owned by Rio Tinto, the world’s second-biggest producer of iron ore………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

Rising demand for rhenium in aero engines is likely to be satisfied by increasing supply of secondary rhenium contained in “engine revert” produced from end-of-life gas turbine parts, UK-based consultancy Roskill Information Services said Thursday.
“At the recent Paris Air Show the big three aero engine manufacturers, GE Aviation, Rolls-Royce and Pratt & Whitney, announced billions of dollars of new sales,” Roskill said. “This was excellent news to rhenium suppliers since rhenium consumption is dominated by the nickel-based superalloys that are used in gas turbine aero engines and also, to a lesser extent, in industrial gas turbines.”……………………………………….Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

Many people have asked me how important ETF’s are. The simple answer is, they are important and getting more important. They are a significant portion of trading activity on all the exchanges. How important?
Volume is not the right metric to use when dealing with ETFs. It’s better to use “traded value,” which as the name implies is the actual dollar value of what is traded. In June, ETF trading was close to 28 percent of total daily exchange value, according to Credit Suisse. That’s the most since March. More importantly, it’s a 35 percent increase from last June………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

ETFs focused on Chinese equities delivered the biggest returns in the first half of the year, according to ETF.com data. “The strong performance was largely tied to a reform-minded government that has shown itself committed to do whatever it takes to grow and open up the stock market,” writes Cinthia Murphy in a ETF.com report.
ETF.com, which just released its June Midyear 2015 ETF fund flows data, reports that midyear ETF inflows set a new record of $101 billion. The data showed total U.S.-listed ETF assets stood at $2.118 trillion at the end of June—6% higher than at the end of 2014 and 14% higher than a year ago………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

Within emerging markets the Asian region provided the main winners in 2014 thanks to the sharp decline in the oil price. But what can investors expect from 2015? Emerging market investors had a difficult time in 2014, with returns lagging developed markets. Over the year as a whole the MSCI AC World Index showed a total return of 8.6% in sterling terms against a meagre 1.4% return for the MSCI Emerging Markets Index.
Within emerging markets the Asian region provided the main winners, with the sharp decline in the oil price seen in the latter part of the year being beneficial for the majority of countries in the region as they are net oil importers………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

Fifteen of the world’s largest banks are under investigation on suspicion of rigging the Brazilian currency, antitrust watchdog Cade said on Thursday, the first such probe in one of the busiest foreign exchange markets globally.
In a document, Cade alleged that the banks colluded to influence benchmark currency rates in Brazil by aligning positions and pushing transactions in a way that deterred competitors from the market between 2007 and 2013, at least. Foreign exchange trading in Brazil is estimated at about $3 trillion a year, excluding swaps and derivative transactions………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

One topic currently dominates Swiss financial circles: Having abandoned its efforts to prevent the franc from appreciating beyond 1.20 to the euro, what does the Swiss central bank have left in its toolbox to prevent an economy-crushing drift toward parity for its currency?
The big worry in the financial community is that the franc is a one-way bet in the direction that will trash the country’s exports. The Greek drama in the euro zone, combined with the global currency war among countries seeking to devalue their way to greater prosperity, amplifies the Swiss currency’s haven status………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

The European Commission should consider some changes to the bloc’s emissions trading system to further improve the working of the carbon market and increase investor confidence, the European Court of Auditors said on Thursday.
In a report on the functioning of the carbon market as a financial exchange, the European Union’s Luxembourg-based independent auditors urge the bloc’s executive arm and national governments to improve monitoring of cross-border sales of emissions allowances and come up with a common legal definition………………………………………..Full Article: Source

Posted on 03 July 2015 by VRS |  Email |Print

Beijing has made a lot of headlines recently for its eco-friendly target setting, and central to many of these plans has been the implementation of regional carbon markets, and eventually the creation of a national system. So far things are not going exactly according to plan. Prices in five of China’s carbon markets have fallen sharply. Permits in the biggest pilot exchange in Guangdong have dropped 73 percent.
Regulatory uncertainty and a lack of transparency have left trade on China’s seven pilot carbon exchanges in the doldrums, which could undermine efforts to cut the nation’s greenhouse gas emissions. China told the United Nations on Tuesday it would cap its emissions by 2030, and promised to cut carbon intensity - the amount produced per unit of economic growth - by 60-65 percent from 2005 levels by then as well………………………………………..Full Article: Source

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