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Oil price shockwave ripples across world markets

Posted on 18 December 2014 by VRS  |  Email |Print

The financial turmoil engulfing Russia is a symptom of a wider world markets earthquake that has its epicenter in oil’s collapse and Western disinflation but is now rippling far and wide across investors’ portfolios.
Not unlike other bouts of global financial contagion in the late 1990s and again in 2008-09, the growing interdependency of world finance means seismic activity in one area can often lead to a chain reaction of seemingly random events…………………………………….Full Article: Source

Oil price shockwave ripples across world markets

Posted on 18 December 2014 by VRS  |  Email |Print

The financial turmoil engulfing Russia is a symptom of a wider world markets earthquake that has its epicenter in oil’s collapse and Western disinflation but is now rippling far and wide across investors’ portfolios.
Not unlike other bouts of global financial contagion in the late 1990s and again in 2008-09, the growing interdependency of world finance means seismic activity in one area can often lead to a chain reaction of seemingly random events…………………………………….Full Article: Source

PGMs Seen Gaining Upward Momentum By End Of 2015; More Supply Deficits Expected

Posted on 18 December 2014 by VRS  |  Email |Print

Platinum group metals might start slowly but eventually should gain upside momentum in 2015, with most analysts expecting rises for the year. Large existing above-ground stockpiles, potential for higher U.S. interest rates and a stronger U.S. dollar are expected to provide obstacles in the early part of 2015. But eventually, further supply/demand deficits are expected to help the market tick higher.
Platinum could remain under pressure early in the year, said Bart Melek, head of commodity strategy with TD Securities. While the market is already in a supply/demand deficit, there are nevertheless considerable inventories already built up. Further, Europe’s economy remains soft, especially important to platinum since it is required for auto catalysts in the diesel-powered vehicles popular on the continent…………………………………….Full Article: Source

Commodities Still Getting Trashed

Posted on 17 December 2014 by VRS  |  Email |Print

A slowdown in Chinese manufacturing and a sustained effort by OPEC to make shale oil extraction unprofitable have been just two of the factors which have been crushing commodities prices. On December 12, China’s National Bureau of Statistics reported that industrial production increased only 7.2 percent in November, on a year-over-year basis.
While that might be acceptable elsewhere in the world, the reading fell short of economists’ expectations of a 7.5 percent increase. China’s government had been anticipating that economic expansion during 2014 would remain at 7.5 percent. More recently, the People’s Bank of China has lowered its sights to 7.4 percent expansion for this year, followed by a slowdown to 7.1 percent growth in 2015……………………………………..Full Article: Source

Gold and Silver Outlook for 2015

Posted on 17 December 2014 by VRS  |  Email |Print

In the past 12 months, gold has traded as high as around $1,380 an ounce and as low as about $1,140 an ounce. From its starting point at around $1,220, though, the change is just $10 an ounce at the current price around $1,210. Since June, when oil prices started falling and the dollar began strengthening, gold has lost about $100 an ounce.
Silver is down about $5 an ounce, from around $21 to around $16 since June. From their June prices, then, gold is down about 8% and silver is down about 25%. The story is significantly different for gold and silver mining companies. Rising mining costs and low prices have plagued the miners for more than two years, and share prices have dropped by 50% to 75% over that time for the firms we are looking at now…………………………………….Full Article: Source

BRICS countries lead global capital flight-report

Posted on 16 December 2014 by VRS  |  Email |Print

The BRICS grouping of emerging market nations is leading the flight of illicit capital from the developing world, according to data in a new report released this week. In its annual estimate of illegal capital flows, Washington-based think-tank Global Financial Integrity (GFI) said it a record $991 billion was siphoned in 2012 from the world’s developing economies, an increase of almost 5 percent from 2011.
Illicit capital incorporates such things as misinvoicing of trade whereby exports and imports are booked at different values to avoid taxes or to hide large transfers of money……………………………………..Full Article: Source

Commodities Go From Hoard to Floored

Posted on 15 December 2014 by VRS  |  Email |Print

In understanding the latest commodities selloff centered on oil, consider a raw material lurking in your kitchen: rice. Economists think stockpiling plays a big role in commodity bubbles, but are only now getting the evidence needed to understand exactly how it works. One implication of what they are learning: Prices haven’t bottomed yet.
A standard theory of how commodity bubbles form begins with an imbalance between supply and demand. This raises prices and prompts some stockpiling, due either to worries about having enough or hopes of selling for more in the future. This curbs supply further, pushing prices higher still. Cautionary stockpiling morphs into hoarding, and the bubble inflates………………………………………..Full Article: Source

Commodities Set Up For A Continued Move Lower

Posted on 12 December 2014 by VRS  |  Email |Print

There have been few places to hide for bullish commodity traders since the end of the summer. As you can see from the chart of the iShares S&P GSCI Commodity-Indexed Trust (GSG) shown below, the bears have sent the price lower by more than 28% over the past six months. It’s only natural that many traders are left wondering when the commodities markets will rebound.
The aforementioned exchange-traded fund is a popular choice amongst commodity traders because it represents broad exposure to a wide range of futures contracts across sectors such as energy, precious metals and agriculture. We’ll take a look at the underlying commodity markets to see if we can gain a better idea of when prices may set to rebound………………………………………..Full Article: Source

Oil’s Drop Spills Into Other Assets

Posted on 12 December 2014 by VRS  |  Email |Print

The benchmark U.S. oil price tumbled below $60 a barrel for the first time in five years, intensifying the pain across financial markets and jolting the central banks of some oil-dependent economies into action.
The decline in oil weighed on U.S. stocks on Thursday. The Dow Jones Industrial Average was up as much as 225 points on strong U.S. economic data before paring gains amid a renewed descent in crude. The blue-chip index ended up 63.19 points, or 0.4%, to 17596.34………………………………………..Full Article: Source

Oil and Gold Warning Signs

Posted on 11 December 2014 by VRS  |  Email |Print

A big spike in gold prices and continued weakness in oil is sending warning signs about the health of the global economy. As China reported Tuesday its consumer price index rose only 1.4% last month — the slowest pace in five years — global deflation fears are mounting. In Greece, a snap election is causing turmoil in the Greek bond market as they try to negotiate their debt financing and independence away from its European bailout strictures.
OPEC is reporting the demand for its oil will be at the lowest level in 12 years. So if deflation is the fear, than the spike in gold yesterday is very troubling. Safe haven buying in US bonds and metals signal fears that the globe is on the verge of a downward deflationary spiral………………………………………..Full Article: Source

The silent crash in commodities—a warning sign

Posted on 10 December 2014 by VRS  |  Email |Print

If the commodity markets were followed as widely as the stock market, the financial world would be buzzing with the news of a crash that has taken place in the value of “stuff.” While the plunging prices of oil, natural gas and gasoline are making headlines every day, thanks to the benefits accruing to consumers of energy products, the message of the commodity markets, in many ways, is hardly a reassuring one when it comes to the outlook for global economic growth.
Basic materials prices for the likes of copper, nickel, iron ore, and other industrial commodities, have collapsed, both in advance of, and now coincident with, weakening economies from Madrid to Moscow and from Berlin to Beijing. This is not good news for the global economy………………………………………..Full Article: Source

The Economic Consequences of Global Oil Deflation

Posted on 09 December 2014 by VRS  |  Email |Print

A new wild card has just been introduced into an already increasingly unstable global economy: a growing world glut of oil and consequent oil price deflation. Since June 2014, the price of high grade (ICE Brent) crude oil has fallen more than 40 percent, declining from around USD$115 a barrel, in January 2014, to just USD$67 a barrel at the end of November.
That’s the lowest since the bottom of the 2009 recession. The price decline has not only been deeper than expected in a normal cyclical correction, but also appears more than just a temporary event. Some predict global oil prices will fall below USD$60 a barrel in 2015, and could potentially fall as low as the USD$40 a barrel collapse that occurred during the 2008-09 recession………………………………………..Full Article: Source

Is this the beginning of the end for OPEC?

Posted on 09 December 2014 by VRS  |  Email |Print

Forty one years ago OPEC, the global oil cartel, boldly asserted its power with an export embargo that drove the price of crude from $3 per barrel to $12 in just six months. Through subsequent oil shocks of 1978, 1990, and 2008, voices on the left — and a few on the right — have used the specter of $200 per barrel oil to justify reams of subsidies for wind and solar (“just another few years, and they’ll be able to stand on their own — really”), ethanol (“imagine how much we’ll save when oil is $300 per barrel”), and even hydrogen cars ($2 billion spent and still counting). The parade of grants, loans, and tax benefits all rode in the name of securing our “energy independence.”
Last week, the West Texas benchmark hit $67 per barrel — a five-year low — and with that milestone the doomsayers’ predictions came crashing down, as well………………………………………..Full Article: Source

Commodities take a breather after torrid November

Posted on 08 December 2014 by VRS  |  Email |Print

Commodities have fallen to a five-year low, leaving producers of most raw materials with little to cheer about during the past month (and especially during the last week). Most notable was the accelerated selling that hit the energy market following the recent OPEC meeting.
The organization’s unwillingness to cut production — thereby signalling a “battle” for market share against other, non-OPEC producers — was the final straw, and it triggered a slump in oil prices to a new five-year low. A monthly collapse of this magnitude in Brent crude has only been seen on four occasions since 1988………………………………………..Full Article: Source

Global gluts hurting commodity prices

Posted on 05 December 2014 by VRS  |  Email |Print

It’s been an annus horribilis for the oil and iron ore industries, and 2015 is unlikely to be much better as producers engage in epic games of chicken. Quite simply, a recent ramp up in output across both sectors means there’s more oil and iron ore being produced than needed but no one wants to be the one to cut back.
Iron ore prices have slumped 46 per cent in the past year while oil prices have dropped 30 per cent since July as both industries grapple with an oversupplied market. In the case of iron ore, global giants Rio Tinto and BHP Billiton have embarked on a controversial strategy to increase production even as prices continue to dive………………………………………..Full Article: Source

What To Watch Out For As We Head Into 2015

Posted on 05 December 2014 by VRS  |  Email |Print

Who would have predicted oil prices in the sixty-dollar range a year ago? Something is not right about these markets. Our take: don’t get burned when markets add fuel to the fire. Here’s what to watch out for as we head into 2015; ignore at your own peril.
The world isn’t running out of oil, but rather out of cheap oil. Therefore the fundamentals don’t support oil trading in the $60s. As oil prices have plunged from over $100 to just over $60 a barrel, it appears to us the market is driven by a combination of the following: The global economy is experiencing a severe slowdown; Major liquidity providers have left the market; and/or Technicals rather than fundamentals are in charge……………………………………….Full Article: Source

While Commodity Hedge Funds Falter, Algo Funds Trading Commodities Outperform

Posted on 05 December 2014 by VRS  |  Email |Print

Fundamental commodity player Armajaro Commodities has been hard hit by oil and trades in less liquid markets, including Cocoa and Coffee, are interesting and appear to be contributing to negative performance. The positions that Armajaro has taken appear to be, in some cases, a mirror opposite of the algorithmic hedge funds trading commodities.
Armajaro’s oil loss come at a time when those trading a momentum strategy in the commodity markets have been feasting on the oil trade. Covenant Capital Management, for instance, will be releasing its November numbers in days and based on a preview of the results given to ValueWalk, Oil was a major factor in the fund’s success………………………………………..Full Article: Source

Australian economy slugged by commodity rout, rates under pressure

Posted on 04 December 2014 by VRS  |  Email |Print

Australia’s economic growth unexpectedly slowed last quarter as sliding export prices took a heavy toll on national income, and the outlook is even darker given the rout in global commodity prices of recent weeks.
The Australian dollar AUD=D4 dived to four-year lows at $0.8392 and markets narrowed the odds of another cut in interest rates after gross domestic product (GDP) rose just 0.3 percent in the third quarter. That was less than half the pace analysts expected, and the smallest increase since early 2013………………………………………..Full Article: Source

Commodity Hedge Funds Struggling To Survive Amid Oil Volatility

Posted on 04 December 2014 by VRS  |  Email |Print

Commodity hedge funds have had a tough time throughout the year and it seems like things are just going to get worse. Several hedge funds have announced that they are closing after consistent underperformance. The most recent casualty is the Brevan Howard Commodities Fund.
BH announced that it will be shutting down the $630 million fund after it lost 4.2% through the end of October. BH Commodities was run by Stephane Nicolas, and joins Brevan Howard’s growing list of funds which have gone under in the last few years. The most recently closed funds include Brevan Howard Emerging Markets Fund and Brevan Howard Investment Fund II Macro FX fund………………………………………..Full Article: Source

El Niño set to cause commodities worries

Posted on 03 December 2014 by VRS  |  Email |Print

Leading meteorologists are on the verge of declaring the emergence of the El Niño weather phenomenon after chances of its occurrence were downgraded earlier this year. Agricultural experts and farmers keep a close watch on the development of the weather phenomenon, caused by a warming of Pacific sea surface temperatures.
El Niño, which means “little boy” in Spanish, can trigger extreme weather in various parts of the world. In the past, it has caused droughts in south and southeast Asia and Australia and floods in parts of Latin America. It also warms the waters of the Pacific Ocean, affecting fishing off the coast of Peru………………………………………..Full Article: Source

CEOs: Economic growth will be weak in 2015

Posted on 03 December 2014 by VRS  |  Email |Print

CEOs from major U.S. companies do not expect strong economic growth in 2015. The Business Roundtable’s fourth-quarter CEO Economic Outlook Index, a composite index of CEO expectations, fell slightly from the third quarter with declines concentrated in capital spending.
The index declined to 85.1 for the fourth quarter, compared with 86.4 in the third quarter. A reading of 50 or above indicates economic expansion and below 50, an economic contraction. The long-term forecast is at 80.3. Gross domestic product in 2015 is expected to grow 2.4 percent, consistent with the CEOs’ 2014 forecast………………………………………..Full Article: Source

Sliding oil leads to commodity volatility

Posted on 02 December 2014 by VRS  |  Email |Print

Volatility hit the commodities markets on Monday as crude prices rebounded after hitting a new five-year low while copper slid to a four-year low, following last week’s sell-off triggered by Opec’s decision to maintain production levels. The Bloomberg Commodity Index of 22 raw materials fell to its lowest since May 2009.
Crude, which had plunged after the cartel’s meeting on Thursday, fell further, with ICE January Brent as low as $67.53 a barrel – the cheapest it has been since October 2009 – before rebounding to $71, up 86 cents……………………………………….Full Article: Source

Oil, commodities drop helps stabilise fragile EMs: QNB

Posted on 01 December 2014 by VRS  |  Email |Print

Recent developments in global financial markets have helped stabilise some of the fragile emerging markets (EMs) that were previously thought to be at risk, QNB has said in a report. “The recent drop in oil prices is changing the risk profile of emerging markets,” QNB said.
Significant adjustments to global financial markets in the second half of 2014 include a large drop in commodity prices, the end of Quantitative Easing (QE) in the US, and a stronger dollar. These developments, particularly the drop in oil prices, have led to a divergence in EM performance and risks going forward………………………………………..Full Article: Source

How OPEC’s Vienna Meeting is Playing Out So Far

Posted on 28 November 2014 by VRS  |  Email |Print

There’s certainly grumbling among members of the Organization of Petroleum Exporting Countries as they meet at the cartel’s headquarters in Vienna to discuss tumbling oil prices. But oil prices sank to four-year lows Thursday, underlining the market’s perception that the griping won’t lead to action robust enough to stop the slump.
As they arrived at OPEC HQ this morning, the differences between OPEC members seemed as deep as ever–although most government officials were stressing they’d stick with the consensus to more strictly enforce the existing production quota of 30 million barrels a day, which could remove at least 300,000 barrels from the market based on recent data……………………………………Full Article: Source

Gold is a 6,000-year bubble - Citi

Posted on 28 November 2014 by VRS  |  Email |Print

Citi’s chief economist Willem Buiter has trained his mental shotgun at goldbugs everywhere, and unloaded both barrels. In a research piece published late yesterday, the Anglo-Dutch economist argued that the metal was not so precious and merely a “six thousand year-old bubble” with hardly any real value. Mr Buiter therefore compares gold to the “intrinsically useless” stone money of the Isle of Yap.
Gold is unlike any other commodity. The only things that come close to it are Bitcoin and similar digital peer-to-peer currencies. Gold is costly to extract from the earth and to refine to a reasonable degree of purity……………………………………Full Article: Source

Commodities accumulators panic – from Vienna to Zurich

Posted on 26 November 2014 by VRS  |  Email |Print

The fact that the accumulators of the world’s key commodities are gathering this week in Austria (OPEC on oil) and Switzerland (Swiss vote on gold reserves) to rein in a sharp decline in their valued resources is a manifestation of rising deflation risks emerging from a strengthening US dollar and a slowing Chinese economy.
Year-to-date, the Reuters/Jefferies CRB Commodity Index is down 5%, and as much as 15% from its June highs. Admittedly, the index is more weighed towards energy commodities than to metals and agricultural commodities. But the technical break of the CRB’s 30-month trendline (green support line in chart), portends further declines below the 260 level……………………………Full Article: Source

US energy is growing, and so is US ‘power’

Posted on 26 November 2014 by VRS  |  Email |Print

America’s unexpected transformation into the world’s biggest natural gas producer and one of the globe’s largest oil producers will give the U.S. more geopolitical clout on the world stage—including in key relationships with China, Russia and the Middle East.
By 2020, the U.S. is likely to be energy independent, along with Canada, its biggest import and export partner. Add to that a new boom expected from a reforming energy industry in Mexico, and North America will more than hold its own as a powerhouse in the global energy market……………………………Full Article: Source

Commodities: A slippery year

Posted on 25 November 2014 by VRS  |  Email |Print

Commodities’ performance in 2014 shows how challenging the market can be for multi-asset investors, but don’t let that put you off. For good reasons, commodities have been an unloved asset class this year, significantly underperforming both equity and fixed income markets. While the longer-term fundamentals remain weak across the broad market, the commodity sector still represents an important component of a multi-asset class portfolio, offering investors an alternative return path and the benefits of diversification.
The ‘financialisation’ of commodities over the last 15 years has brought easier access to this market. Institutional and retail investors can now participate in a broad range of product offerings, mostly commonly in Exchange Traded Commodities………………………………….Full Article: Source

Is The Gold Turning The Corner?

Posted on 25 November 2014 by VRS  |  Email |Print

Gold miners’ costs are mostly higher than current spot prices, increasing the likelihood of writedowns next year. Senior gold miner gold cash costs surged 226% to $707 an ounce, according to a study. Shanghai Gold Exchange deliveries last week were up 20% to 54.2 tonnes.
All over the world, gold has emotional, cultural and financial value, which supports demand across generations. Gold is fashioned into jewelry and used to manage risk in financial portfolios and protect the wealth of nations………………………………….Full Article: Source

All eyes on oil: What will OPEC do this week?

Posted on 24 November 2014 by VRS  |  Email |Print

While Americans are chomping down on turkey and pie this week, everyone involved in the energy world will be closely watching the Thanksgiving Day meeting of the OPEC in Vienna, Austria. Oil prices have tumbled dramatically in recent weeks. Oil now trades below $80 a barrel and most Americans can buy gas for their cars for under $3 a gallon.
The question is how OPEC will respond. So far, energy producing nations and companies haven’t scaled back product even though it’s pretty clear there’s an over supply of oil on the world market…………………………………Full Article: Source

Global economy will benefit from oil price decline

Posted on 21 November 2014 by VRS  |  Email |Print

If OPEC fails to take a unified approach on stabilizing oil prices the global economy will be the biggest winner because oil prices will continue to fall, Fred Beach, of the University of Texas at Austin, said.
First of all, Saudi Arabia being an independent producer doesn’t always link its production to supply and demand that other OPEC countries want to do. That is why there is so much focus on the upcoming OPEC meeting to see if the organization as a whole comes to an agreement to either cut production to stabilize prices or if the independent countries want to go their own way………………………………….Full Article: Source

Life after the commodities boom

Posted on 19 November 2014 by VRS  |  Email |Print

Data is one of the world’s most precious commodities. And companies dealing in commodities are facing ever complex data sets, more regulations, tighter trading timelines and depressed markets. Those left in the market need to increase profit margins. Maybe, just maybe, data holds the answer.
Commodities firms need to make rapid changes, create new strategies and new solutions. The challenges are complex and multi-layered. For one disparate systems complicate how trades are captured and transactions are managed. Multiple geographies, different commodities on multiple systems across execution venues add more layers……………………………………Full Article: Source

No easy options for Opec over oil slide

Posted on 19 November 2014 by VRS  |  Email |Print

The tension has been palpable in the lead-up to next week’s Opec gathering in Vienna. As the oil price has languished at four-year lows, a flurry of diplomatic missions between some of the cartel’s members has taken place. Signalling through public statements and unofficial channels has ramped up.
In the past few days, Nigeria has said it will use up half its so-called excess crude account to support current spending, Kuwait’s cabinet has called for action to address the price slide, while Iran and Venezuela have sought support from fellow crude producers to shore up prices……………………………………Full Article: Source

Why Commodity Prices Are Down and May Go Lower

Posted on 18 November 2014 by VRS  |  Email |Print

A multitude of mavens, pundits, sages, wizards, writers, and assorted talking heads with various but vested interests in the hard commodities sector have weighed-in on the supposed demise of the secular bull market in “stuff” over the past few months.
Reactions have been varied but predictable: the usual suspects in the gold- and silver-bug camps have played the market manipulation card to explain the overall weakness in precious metals prices; the China perma-bears have claimed the downtick in industrial commodities to be a foreshadowing of the pending collapse of that country’s decade-long economic growth; ………………………………..Full Article: Source

Mounting Pressure on OPEC Spurs More Wagers on Oil Rally

Posted on 18 November 2014 by VRS  |  Email |Print

Speculators got more bullish on oil for the first time in three weeks, judging that a slump in prices to a four-year low will force OPEC to act. The net-long position in West Texas Intermediate rose 8.7 percent in the week ended Nov. 11, U.S. Commodity Futures Trading Commission data show. Long holdings rebounded from the lowest level in 17 months while short bets contracted.
WTI tumbled 30 percent since June as U.S. output climbed to three-decade high, adding to a global supply glut at a time when the International Energy Agency says demand growth is slowing…………………………………Full Article: Source

Warning Signs From Commodity Prices

Posted on 17 November 2014 by VRS  |  Email |Print

For many consumers and businesses the recent drop in commodity prices has provided a tidy windfall — one analyst estimated that the typical American household would save $400 a year thanks to lower gasoline prices. But the tumbling price of fuels, metals and other commodities is also sending a warning about the global economy.
Over all, commodity prices have fallen nearly 15 percent since late June, according to a Bloomberg index. Last week, the price of crude oil dropped to a four-year low, about $74 a barrel, down from about $107 a barrel in June. The prices of metals like copper, platinum and silver have also fallen sharply since the summer……………………………………Full Article: Source

Oil Slide Prompts Iran’s Oil Minister to Visit U.A.E.

Posted on 17 November 2014 by VRS  |  Email |Print

Iranian oil minister Bijan Namdar Zanganeh is preparing to visit the U.A.E. this week, underscoring the deepening concern among OPEC members over the slump in oil prices.
After trips to Kuwait and Qatar last week to discuss strategies to buoy prices, Zanganeh will meet with officials in the U.A.E. tomorrow, Shana, the Tehran-based oil ministry’s news service, said on its website yesterday. The discussions come before the Organization of Petroleum Exporting Countries’ next scheduled meeting on Nov. 27……………………………………Full Article: Source

ANZ Cuts Commodity Price Forecasts on Slowing Chinese Growth

Posted on 14 November 2014 by VRS  |  Email |Print

Australia & New Zealand Banking Group Ltd. trimmed its price projections for commodities including oil, iron ore and nickel next year on slowing growth in China and rising inventories.
The bank cut its forecasts by an average 5.1 percent for next year and 3.8 percent for 2016, analysts including Mark Pervan wrote in a report today. The lender reduced its 2015 iron ore estimate by 22 percent to $78 a metric ton and its Brent crude outlook by 8.2 percent to $92 a barrel…………………………………Full Article: Source

GE’S Rice Says Commodities Slump Puts Premium on Products

Posted on 14 November 2014 by VRS  |  Email |Print

General Electric Co. (GE), which provides everything from oil drilling systems to vehicles for underground mining, said it expects to benefit from lower commodities prices as producers chase cost cuts to offset declining revenue.
The company can still gain from demand for equipment and services that help trim expenses even as slumping prices for crude and other raw materials makes orders “a little bit bumpier,” GE Vice Chairman John Rice said in an interview in Rio de Janeiro………………………………..Full Article: Source

Why Australia will survive the commodity slump

Posted on 11 November 2014 by VRS  |  Email |Print

It’s not a well-known fact, but a slump in commodity prices has never caused a recession in Australia. With that in mind, we shouldn’t be overly concerned by investment bank analysts who run around saying just this — they are very wrong. Indeed, amid all the wailing and gnashing of teeth, it strikes me that the commodity drop may even be beneficial.
I realise this point may seem counterintuitive, and may even be met with howls of outrage — commodities account for about 73 per cent of our exports. Yet the point is, a drop in commodity prices isn’t all bad. No doubt profits for ‘our’ commodity exporters will plummet — sharply maybe — yet it’s often forgotten that our commodity exporters aren’t really true blue Aussies………………………………………..Full Article: Source

Permanent gold backwardation = global meltdown ahead

Posted on 10 November 2014 by VRS  |  Email |Print

This article discusses the meaning of gold backwardation and its relationship with the global economy. Antal Fekete warned many years ago that a “permanent gold backwardation” would act as a financial black hole that would consume the entire global financial system. Subsequent “scholars” found (minor) flaws in his argument. However (I believe) Fekete was right and that his warning is particularly pertinent today - as gold now enters its fourth year in (or near) backwardation.
First - some definitions. The GOFO (gold forward rate) measures the difference between the spot gold price and the forward (futures) price, measured as a percentage, quoted individually over 1, 2, 3, 6 and 12 months. GOFO is (a swap rate) paid by the gold owner, who puts up his gold as collateral to borrow dollars………………………………………..Full Article: Source

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How Much Of The World’s Commodity Supply Is Exposed To Ebola

Posted on 03 November 2014 by VRS  |  Email |Print

The outbreak of the Ebola virus in West Africa has been tragic and the outlook remains frightening. Because of the region’s importance as a supplier of commodities, investors and economists also worry about what a disruption in production could mean for prices.
“So far the impact on global commodity markets has been relatively contained,” Deutsche Bank’s Anna Mulholland said in October. “This most likely reflects the fact that Liberia, Sierra Leone and Guinea combined represent less than 2% of global production/exports of cocoa, coffee, cotton, rubber and palm oil.”……………………………………….Full Article: Source

Is a secret ‘oil war’ raging?

Posted on 03 November 2014 by VRS  |  Email |Print

Oil prices have been falling for the past two months. The OPEC basket price has ranged between $80 and $90 a barrel compared to the $100-$115 range of the past four years. This recent drop happens at a time when oil-producing countries will draft their 2015 budget and try to adopt an average oil price for the upcoming year.
The drop in oil prices is expected to adversely affect their budgets. Markets usually expect OPEC countries to cut production when prices fall. This time, however, OPEC is looking to US shale oil to contribute to price stability, because the increase in shale oil production has impacted the markets………………………………………..Full Article: Source

Commodity price plunge may benefit China’s slowing economy

Posted on 31 October 2014 by VRS  |  Email |Print

Price slumps in the global commodity market will likely mean good news for China after the country reported slowing growth for the third quarter. Continued weaker commodity prices led by crude oil are expected to save the country on enormous import bills, boost trade surplus and provide more leeway for Chinese policy makers to fine-tune the economy.
Crude prices started a downward streak in the beginning of July and have fallen considerably from their previous peak. Overnight on Monday, light, sweet crude for December delivery dipped below 80 U.S. dollars a barrel on the New York Mercantile Exchange, tumbling from over 107 U.S. dollars on June 20. December Brent crude dropped to less than 86 U.S. dollars on the same day, around 25 percent lower than the peak four months ago………………………………………..Full Article: Source

Gold price could benefit from Swiss vote

Posted on 30 October 2014 by VRS  |  Email |Print

Switzerland enjoys a rather more direct system of democracy than we do. If you want some kind of constitutional change, and you can find 100,000 people prepared to support your proposal with their signature, you can get a referendum called.
If the majority then vote in your favour, the matter is then referred to the 26 cantons – the administrative regions (similar to our counties) – and if the majority too vote yes, you’ll get the change you were agitating for. There’s a referendum coming up next month that could have huge ramifications for gold investors………………………………………..Full Article: Source

Few commodities buck falling trend

Posted on 29 October 2014 by VRS  |  Email |Print

Most everything we consume begins as a commodity, so when commodity prices go up, it transfers wealth and power from consumers to producers, but when commodity prices fall, it’s as close as it gets in economics to getting two meals for the price of one, or double coupons at your favorite grocery store. Such a moment appears to be happening now.
With few exceptions, most commodities have been falling over the past two months, with some falling rather quickly. Commodity prices are being pushed lower by an increased supply of most commodities, a slowing global economy, as well as a slowing China, the world’s largest consumer of most raw materials. Of the 69 commodities we follow weekly, only biofuels, cattle and sugar are in the positive over the past eight weeks………………………………………..Full Article: Source

Why Does Saudi Arabia Seem So Comfortable With Falling Oil Prices?

Posted on 29 October 2014 by VRS  |  Email |Print

Oil prices continue to tumble: down about 25 percent since mid-June to a four-year low, and many analysts believe there is no end in sight. While that’s good for consumers and most businesses in the U.S., the falling price is bad for oil-exporting countries such as Russia, Venezuela, Iran and Iraq.
And blame — or credit — for the plummeting prices is falling squarely on Saudi Arabia. The kingdom, often called the “central banker of oil,” is still the key player in oil prices, says Rachel Bronson, author of Thicker Than Oil: America’s Uneasy Partnership with Saudi Arabia………………………………………..Full Article: Source

Cheaper oil: Many winners, a few bad losers

Posted on 24 October 2014 by VRS  |  Email |Print

The collapse of the Soviet Union in 1991 had many causes. None was as basic as the fall in the price of oil, its main export, by two-thirds in real terms between 1980 and 1986. By the same token, the 14-year rule of Vladimir Putin, heir to what remained, has been bolstered by a threefold rise in the oil price.
Now the oil price is falling again. Since June, it has dropped from about $115 for a barrel of Brent crude to $85 or so—a reduction of roughly a quarter. If prices settle at today’s level, the bill for oil consumers will be about $1 trillion a year lower. That would be a shot in the arm for a stagnating world economy. It would also have big political consequences. For some governments it would be a rare opportunity; for others, a threat………………………………………..Full Article: Source

Dow Chemical Says Lower Oil Price to Boost Global Economy

Posted on 23 October 2014 by VRS  |  Email |Print

Dow Chemical Co. (DOW), the largest U.S. chemical maker by sales, said this year’s plunging oil prices will stimulate national economies and help rather than hurt its plastics business next year. Lower oil prices should help increase gross domestic product in the U.S., the U.K, Japan and China, Howard Ungerleider, chief financial officer of Midland, Michigan-based Dow, said on a conference call with analysts today.
The positive effect will become more visible through 2015, he said. “Low oil price means more demand in the GDP,” Chairman and Chief Executive Officer Andrew Liveris said on the call………………………………………..Full Article: Source

International demand for gold continues surging

Posted on 23 October 2014 by VRS  |  Email |Print

Demand for gold continues to be robust and has indeed increased significantly in recent weeks despite gold’s most recent paper driven gold weakness. Demand in China and India surged again and gold reserve diversification by the central bank of Russia hit a new record high in September as geopolitical tensions rose.
The seemingly insatiable appetite of the growing Indian middle class for gold is causing the government in India to again consider imposing sanctions on the importing of gold. Gold imports into India in September were worth $3.8 billion. This figure is almost double the $2 billion spent by Indians in August as, once again, the Indian middle class, like their Chinese counterparts, used the opportunity of a weakened gold price to increase their holdings………………………………………..Full Article: Source

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