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Commodities Briefing - Category | Financial more

Influence of banks, hedge funds on commodities lowest since 2008

Posted on 17 April 2014 by VRS  |  Email |Print

United Nations economists who previously called for government intervention to tame volatile swings in commodity prices say banks and hedge funds have since reduced their influence to the lowest level since 2008.
In a 2012 report for the UN Conference on Trade and Development (UNCTAD), David Bicchetti and Nicolas Maystre said the rise of financial players in commodities markets over the previous decade had moved prices of oil and grains away from the fundamentals of supply and demand………………………………………..Full Article: Source

Banks tussle to join next generation of commodity dealers

Posted on 16 April 2014 by VRS  |  Email |Print

Facing low volatility, a lack of trading opportunities and compliance headaches, major global investment banks are pulling back from commodities. But at the same time, a number of smaller and regional players are actively seeking to increase their involvement.
A sinking feeling has pervaded Wall Street recently. During the past few years, commodity revenues have been falling at major global investment banks. Industry titans such as Deutsche Bank, JP Morgan and Morgan Stanley have decided to quit large parts of the commodities market, or leave it altogether………………………………………..Full Article: Source

U.S. bank regulator issues bulletin on oil, gas lending risks

Posted on 10 April 2014 by VRS  |  Email |Print

A U.S. regulatory agency on Wednesday issued tips for bankers and examiners on potential risks involved with loans for oil and natural gas production, as the domestic energy boom continues.
The U.S. Office of the Comptroller of the Currency (OCC) published on its website a bulletin laying out supervisors’ expectations for energy production lending and spelling out new examination procedures for banks issuing the loans………………………………………..Full Article: Source

Why are banks closing commodity arms?

Posted on 10 April 2014 by VRS  |  Email |Print

Higher regulatory pressure and diminishing profit potential. Are these just excuses, or are they the real reasons we’ve seen a major shift by the investment banks out of commodities and physical trading?
Over the past two years, if we look at two headliners for commodities and metals - gold and corn- we can see why. Not pretty. Actually, ugly. So as you can see, probably more of a problem with diminishing profitability rather than regulatory oversight………………………………………..Full Article: Source

Bank reform seen by Schreiber pushing commodities into opacity

Posted on 09 April 2014 by VRS  |  Email |Print

Banks pulling out of commodity trading because of rules on proprietary investing and capital requirements are pushing raw-material trade into less regulated and more opaque territory, investor Eric Schreiber said.
Regulations such as Basel III and the Dodd-Frank Act have a “significant impact” on banks, pushing commodity business to trading houses, according to Schreiber, the former head of commodities at Swiss wealth manager Union Bancaire Privee………………………………………..Full Article: Source

How banks are cutting risk by leaving the commodities business

Posted on 09 April 2014 by VRS  |  Email |Print

In January 2014, the Federal Reserve issued an advance notice of proposed rulemaking (ANPR) in which it raised questions regarding increased limits and restrictions on the physical commodities activities of financial holding companies (FHCs) under the Bank Holding Company Act of 1956.
In the ANPR, the Fed cites recent environmental events as a reason for its review of physical commodities activities by FHCs. The notice cites the Deepwater Horizon oil spill in the Gulf of Mexico, the incident at the Fukushima Daiichi nuclear power plant, and other environmental events to support its concerns that “the costs and liability related to physical commodity activities can be difficult to limit and higher than expected”………………………………………..Full Article: Source

Do commodities belong in your allocation?

Posted on 08 April 2014 by VRS  |  Email |Print

The market price of a basket of commodities should increase roughly in line with inflation, but why would there be returns beyond this? While the spot prices of commodities tend to track inflation, futures contracts of commodities have historically delivered positive returns.
John Maynard Keynes laid the foundation of modern thinking on commodity futures markets . He proposed that investors in commodity futures are providing risk capacity to the producers of commodities by allowing them to lock in a fixed price for commodities to be delivered at a future date. In other words, investors in future contracts are essentially insuring commodity producers against a decline in prices in the future………………………………………..Full Article: Source

Money is leaving emerging markets for riskier bets at the investment frontier

Posted on 08 April 2014 by VRS  |  Email |Print

Many of Africa’s roads are scarred with potholes, so the fresh tarmac on the drive between Ndola and Kitwe, two cities in Zambia’s copper belt, is something of a treat. The country’s roadbuilding is financed by a $750m Eurobond (as dollar bonds issued outside America are known) issued in September 2012. The timing was perfect.
The Federal Reserve had an open-ended commitment to buy Treasuries to keep yields low. Investors in America and Europe were hungry to buy dollar-denominated debt offering juicy yields. Zambia drew $12 billion of orders for a ten-year bond paying only 5.4%. Spain could not borrow as cheaply at the time………………………………………..Full Article: Source

Is structured commodity finance a hidden bubble?

Posted on 28 March 2014 by VRS  |  Email |Print

Commodity markets focus on bringing commodities from their place of origin to the centres of demand in the most efficient manner. Banks, trade houses, consumers and producers all aim to bring efficiency to this flow, but there is always room for improvement.
Structured finance, the activity of lending against inventory held as collateral, focuses on ameliorating and streamlining two aspects of the commodity business – cash flow and flow of goods. Structured finance has usually been the forte of large financial institutions, but recently commodities trading firms have entered this business. This has resulted in excess lending capacity, which has led to lower costs of capital for borrowers………………………………Full Article: Source

Will the stagnant demand in commodities encourage hedging

Posted on 27 March 2014 by VRS  |  Email |Print

The commodity market, which had defied gravity during the last few years, is showing signs of slowing down. It is not a breather but a shift to a bear cycle. No doubt the “investors” have vanished and the herd mentality has gone out.
The standard explanation during the period of price surge was that the booming demand, particularly from China, was clashing with stagnant supply of energy, metals and agricultural produce. Talks of stagnant or falling demand are now in the favour…………………………………Full Article: Source

JPMorgan named top commodities bank, day after selling physical business

Posted on 21 March 2014 by VRS  |  Email |Print

JPMorgan commodity chief Blythe Masters laid out an ambitious plan four years ago to become the top Wall Street bank in energy and metals trading.
Last year Masters achieved that goal, a closely watched report said on Thursday, the day after the bank announced the sale of the giant physical commodities operation she had assembled………………………………………..Full Article: Source

J.P. Morgan to sell commodities business for $3.5 bln

Posted on 20 March 2014 by VRS  |  Email |Print

J.P. Morgan Chase & Co. has become the latest bank to scale back its commodities business, striking a deal to sell its physical assets and trading arm to Swiss trader Mercuria Energy Group Ltd. for $3.5 billion in cash.
The deal, expected to be completed in the third quarter, marks the largest ever acquisition completed by Mercuria, a closely held company founded in 2004 by Swiss traders Marco Dunand and Daniel Jaeggi that is relatively unknown outside the physical commodities trading industry………………………………………..Full Article: Source

Banks and commodities never mixed

Posted on 20 March 2014 by VRS  |  Email |Print

J.P. Morgan Chase & Co.’s decision to sell its commodities trading unit ends a chapter of anything-goes banking that dominated the 2000s after the so-called financial modernization laws passed a little over a decade ago.
The bank on Wednesday said it agreed to sell the unit for $3.5 billion cash to Mercuria Energy Group Ltd., the Swiss trading giant. J.P. Morgan’s move follows similar sales or shuttering of commodities units by Deutsche Bank AG , Goldman Sachs Group Inc. and Morgan Stanley to name a few. Exiting what amounted to a more-than-a-decade experiment in the nation’s banking system wasn’t without costs………………………………………..Full Article: Source

Goldman says Chinese commodity financing may unwind in 24 months

Posted on 19 March 2014 by VRS  |  Email |Print

Financing arrangments in China using commodities from copper to rubber as collateral to obtain credit may be unwound in 12 to 24 months, driven by increased yuan volatility, Goldman Sachs Group Inc. said.
As much as 1 million metric tons of copper and 30 million tons of iron ore could be released if the deals unwind, the bank said in a report today. The unwinding would be bearish “given relatively limited physical liquidity to absorb the shock,” analysts led by Jeffrey Currie wrote………………………………………..Full Article: Source

Financial markets focus on commodity prices

Posted on 13 March 2014 by VRS  |  Email |Print

The price moves are not for the most part very big, but it is beginning to look as if the markets are rolling over. The dollar, yen and Swiss francs are all relatively strong. Equity markets are under pressure. The MSCI Asia Pacific Index and the Emerging Equity Index are off 1.3%-1.5%. Europe bourses are also in the red, with the Dow Jones Stoxx 600 off almost 1%. Core bond yields are lower and the periphery higher.
There is much focus at the moment on the decline of copper, iron ore and crude oil prices. Copper prices continue to plunge. The 5% limit was hit in Shanghai. The four-session (though today) swoon, copper prices have fallen nearly 10%. The break of the $300 level is important as that represents the shelf that extends back to 2011………………………………………..Full Article: Source

Commodities trading jumped 23pct last year even as banks retreat

Posted on 11 March 2014 by VRS  |  Email |Print

Commodities derivatives trading jumped 23 percent last year, led by the U.S. and China, even as the biggest banks pulled back amid slumping revenues.
The increase in commodities trading, which accounted for 18 percent of volumes across all products, outpaced gains in interest rate and currency derivatives, the World Federation of Exchanges said in an e-mailed report today. Equity volumes fell 5.3 percent, it said………………………………………..Full Article: Source

Glencore sees growing demand for commodities

Posted on 05 March 2014 by VRS  |  Email |Print

Commodities trader and producer Glencore Xstrata says global demand for its raw materials is expected to grow, but that its earnings have been hit by big one-time charges. The expenses, many associated with Glencore’s takeover of Xstrata, pushed the company to a net loss of $7.4 billion last year, compared with a profit of $1 billion the previous year. Not counting those expenses, profits rose 20 percent to $3.67 billion.
Chief Executive Ivan Glasenberg says the company sees healthy demand growth in key commodities, “underpinned by the long term trend of urbanization in emerging markets and parts of the developed world returning to trend growth.”……………………………………….Full Article: Source

Speculators boost bullish oil bets to record on cushing

Posted on 03 March 2014 by VRS  |  Email |Print

Hedge funds increased their bullish bets on West Texas Intermediate oil to a record as rising flows of domestic crude to Gulf Coast refineries cut demand for more costly foreign grades.
Money managers bolstered net-long positions, or wagers on rising prices, on the U.S. benchmark by 2.2 percent in the week ended Feb. 25, Commodity Futures Trading Commission data show. The positions climbed to the highest level in CFTC data going back to 2006………………………………………..Full Article: Source

India: Exemption list in commodities transaction tax may be reworked

Posted on 28 February 2014 by VRS  |  Email |Print

The exemption list in the Commodities transaction tax (CTT) may be reworked before the final budget is presented in May 2014. The restructuring of the exemption follows recommendations from the industry to expand the exemption list by including processed items of all agricultural commodities and not some like at present.
To this effect, the consumer affairs department under ministry of finance has also sought a clarification from revenue regarding the structure of the exemption list of CTT………………………………………..Full Article: Source

Interest rates “key” to 2014 gold price

Posted on 27 February 2014 by VRS  |  Email |Print

U.S. interest rates are “key” to the direction of the gold price in 2014, according to analysts and fund managers. Historically, the gold price has “traditionally had a negative correlation with long-term US real interest rates,” says Walter de Wet, head of commodities research in London for Standard Bank, moving higher when interest rates fall after accounting for inflation, and vice versa.
“A lower bond yield would imply a higher gold price,” says de Wet. But further ahead, his colleagues at Standard Bank “continue to expect US bond yields to move higher towards year-end,” with the 10-year Treasury bond falling in price until its yield rises a whole percentage from today, up to 3.75%………………………………………..Full Article: Source

Senator urges curbs on banks buying commodities

Posted on 26 February 2014 by VRS  |  Email |Print

Ohio Sen. Sherrod Brown on Tuesday said he pushed a pair of nominees for key regulatory posts to take steps to deter big banks from owning and storing oil, aluminum and other key commodities. Brown, chairman of a Senate panel that monitors financial institutions, has been urging regulators to crack down on behavior that could lead to higher prices for consumers.
Some large banks buy and hold commodities in a strategy that can lead to higher prices for things such as beer, canned food or fuel. Brown met with Chris Giancarlo and Sharon Bowen as they made the rounds among senators after their nomination to the Commodities Future Trading Commission. ……………………………………….Full Article: Source

Hedge fund natural gas wagers jump on tumbling supplies: Energy

Posted on 24 February 2014 by VRS  |  Email |Print

Hedge funds increased bullish bets on natural gas for the fifth time in six weeks as arctic weather stoked demand for the heating fuel, depleting stockpiles and sending prices to a five-year high.
Money managers’ net-long positions, or wagers on rising prices, jumped 5 percent in the seven days ended Feb. 18, to the highest level since May, U.S. Commodity Futures Trading Commission data show. Bearish bets slid 7.3 percent to the lowest level in more than two years………………………………………..Full Article: Source

G-20 finance chiefs vow to boost world economy by $2 trillion over next 5 years

Posted on 24 February 2014 by VRS  |  Email |Print

Finance chiefs from the 20 largest economies agreed Sunday to implement policies that will boost world GDP by more than $2 trillion over the coming five years. Australian Treasurer Joe Hockey, who hosted the Group of 20 meeting in Sydney, said the commitment from the G-20 finance ministers and central bankers was “unprecedented.”
The world economy has sputtered since the 2008 financial crisis and global recession that followed. Progress in returning economic growth to pre-crisis levels has been hampered by austerity policies in Europe, high unemployment in the U.S. and a cooling of China’s torrid expansion………………………………………..Full Article: Source

Commodities revenue at top 10 banks declined 18pct last year

Posted on 20 February 2014 by VRS  |  Email |Print

Commodities revenue at the 10 largest investment banks dropped 18 percent last year, according to analytics company Coalition Ltd. Revenue dropped to $4.5 billion from $5.5 billion in 2012, Coalition said in an e-mailed report. In November, the company anticipated a 14 percent drop in revenue.
“Revenues continued to decline, affected by a depressed client environment and low volatility,” Coalition said. “In 4Q13, performance in U.S. power and gas was particularly weak.”……………………………………….Full Article: Source

Major banks’ commodities revenue slid 18 pct in 2013

Posted on 19 February 2014 by VRS  |  Email |Print

Commodities revenue at the top 10 investment banks dropped 18 percent in 2013 in a third year of declines due to weak investor interest and low volatility, a consultancy said on Tuesday.
Revenue from commodities for top banks fell to $4.5 billion last year from $5.5 billion the previous year, London-based financial industry analytics firm Coalition said in a report. Many banks have slashed their commodities businesses and others have completely shut down commodities units, which also have been hit by tougher regulation and higher capital requirements after the global financial crisis………………………………………..Full Article: Source

Hedge funds raise gold bull bets as Paulson holds: Commodities

Posted on 17 February 2014 by VRS  |  Email |Print

Hedge funds raised bullish gold wagers to a three-month high as signs of slowing U.S. economic growth spurred demand for haven assets. Billionaire John Paulson maintained his bullion holdings last quarter.
The net-long position climbed 17 percent to 69,291 futures and options in the week ended Feb. 11, U.S. Commodity Futures Trading Commission data show. Long wagers rose 8.8 percent, the most since March. Net-bullish holdings across 18 U.S.-traded commodities rose 18 percent to 1.07 million contracts, the highest since October 2012, led by silver and coffee………………………………………..Full Article: Source

Yellen promises new rules governing banks’ commodities activity

Posted on 12 February 2014 by VRS  |  Email |Print

Federal Reserve Chairman Janet Yellen pledged that the regulator will make changes in its oversight of banks’ role in the commodities business, which has attracted regulatory and lawmaker scrutiny.
“The Federal Reserve’s main focus in our supervision of these areas is to make sure that banks operate in the commodities activities in a safe and sound manner,” Yellen said at a House Financial Services hearing………………………………………..Full Article: Source

Commodity groups launch next attack on U.S. position limits rule

Posted on 12 February 2014 by VRS  |  Email |Print

A group of commodity firms came out against a new U.S. rule to curb market speculation in a letter on Monday, after banks successfully shot down an earlier version of the position limits rule in court.
The new rule by the Commodity Futures Trading Commission attracted well over 100 comment letters by industry participants after the agency - which regulates swaps and futures - launched it in November………………………………………..Full Article: Source

Hedge funds raising gold wagers dump copper

Posted on 03 February 2014 by VRS  |  Email |Print

Hedge funds raised bullish gold wagers by the most since July and sold copper holdings as emerging-market turmoil boosted concern the global economy will slow and increased demand for precious metals as a haven.
The net-long position in gold jumped 40 percent to 60,672 futures and options in the week ended Jan. 28, U.S. Commodity Futures Trading Commission data show. Long wagers rose 5.5 percent to the highest since September, and short bets dropped 16 percent. Net-bullish copper holdings tumbled 62 percent as shorts gained by the most in 11 weeks………………………………………..Full Article: Source

Banks look to exit commodities

Posted on 31 January 2014 by VRS  |  Email |Print

JPMorgan is rumored to be selling its commodity business. The deal could be worth around $2 billion for the bank. Commodities have been profitable for banks in the past. But now several banks are changing course.
To understand what’s changing, let’s start with how this business actually works. Banks do more than trade commodities. Their holding companies will actually take possession the physical commodities, like aluminum or oil………………………………………..Full Article: Source

Goldman sees more pain ahead for commodities

Posted on 31 January 2014 by VRS  |  Email |Print

Banks led by Goldman Sachs Group Inc. and Citigroup Inc. say commodities are heading for losses in 2014 as rising supplies and slowing demand compound slumps that led to bear markets last year in gold, copper and corn.
Open interest measuring holdings across the 24 commodities tracked by the Standard & Poor’s GSCI Spot Index fell for three straight quarters through December, the longest slump since the global recession in 2008. The super cycle that led commodities to almost quadruple since 2001 is reversing, with prices set to drop 3 percent in 12 months, Goldman said. The asset class will be a “wallflower” compared with equities, Citigroup said………………………………………..Full Article: Source

Global gold hedge book continues decline in 3Q 2013

Posted on 29 January 2014 by VRS  |  Email |Print

Net producers de-hedging of gold continued in the third quarter of 2013, according to a quarterly hedge book report from Thomson Reuters GFMS and Societe Generale released on Tuesday. The decline was 188,000 ounces, or 6 metric tons, the firms said.
With the fall, the global gold hedge book stood at 2.94 million ounces, or 92 tons, as of the end of the third quarter. This was lowest volume since the quarterly report began in 2002………………………………………..Full Article: Source

Gold de-hedging continues, but at reducing rate - SocGen

Posted on 29 January 2014 by VRS  |  Email |Print

So far the increasing siren songs from the investment bankers that gold miners should return to hedging a proportion of their gold output to protect future margins seems to have fallen on deaf ears. Perhaps not surprising given that gold miners are by nature optimists and most are looking for an increasing gold price ahead – not further price erosion.
Logically the time to hedge is at or near a metal’s high point, not at or near its lows – and most gold miners believe, perhaps more in hope than with true evidence to support their views, that the gold price may have already bottomed, despite the almost unanimous gloomy outlook presented by mainstream gold analysts and projected by some of the biggest investment banking names in the industry………………………………………..Full Article: Source

Commodities without banks: More expensive, less reliable

Posted on 24 January 2014 by VRS  |  Email |Print

With its recent announcement that it is to quit almost all commodities trading, Deutsche Bank became just the latest bank to exit the sector. Both Morgan Stanley and JP Morgan are divesting assets, Deutsche has gone, and it remains to be seen who will remain.
The primary driving force of this rush for the exit is regulation. The days of banks being able to over-leverage their capital across numerous geographies and businesses are over. They might have ended naturally anyway – the strategy of maximising your leverage ratio did not work out too well – but regulators are pushing the pace………………………………………..Full Article: Source

Oil industry to face more cost pressure, Petrofac CEO says

Posted on 24 January 2014 by VRS  |  Email |Print

Oil and gas producers will have to keep a lid on investment to appease shareholders, creating a challenge for services companies such as Petrofac Ltd. (PFC), Chief Executive Officer Ayman Asfari said.
“Our industry is facing a huge amount of cost pressure,” Asfari said in an interview in Davos, Switzerland today. “More is being spent to produce less. Our clients are seeing the rate of return on capital dropping and they’re being challenged by investors who want them to be more disciplined.”……………………………………….Full Article: Source

Abenomics spurs gold sales in Japan as inflation hedge

Posted on 23 January 2014 by VRS  |  Email |Print

Gold sales by Japan’s biggest bullion retailer surged 63 percent to a five-year high as prices slumped and investors sought refuge from Prime Minister ShinzoAbe’s campaign to stoke inflation and weaken the yen.
Sales of bars to local investors by Tanaka Kikinzoku Kogyo K.K. soared to 37.3 metric tons in 2013, from 22.9 tons a year earlier, the Tokyo-based company said in a statement today. Sales exceeded purchases for the first time since 2004………………………………………..Full Article: Source

Gold-price banks meet amid regulatory pressure

Posted on 22 January 2014 by VRS  |  Email |Print

The five banks that set the benchmark price for gold are meeting Tuesday as they seek an external audit of the processes they use, according to a person with knowledge of the matter.
The five have formed a steering committee to review the so-called “London fixings” amid intense regulatory scrutiny over possible manipulation of precious-metals prices. As spot gold is traded over the counter 24 hours a day and there is no central source for data on prices, each morning and afternoon in London a group of five market participants meets to determine a snapshot of the price, commonly known as the London fix……………………………..Full Article: Source

Fed eyes fresh measures to restrict banks’ commodities trading

Posted on 15 January 2014 by VRS  |  Email |Print

The Federal Reserve is asking for public input on whether to put restrictions on banks’ trading and warehousing of physical commodities amid lawmaker scrutiny of potential conflicts of interest and market manipulation.
The Fed’s request released today seeks comment on 24 questions, including some on the risks posed by bank ownership and trading of commodities such as oil, gas and aluminum by deposit-taking banks and the possible benefits of imposing additional capital standards………………………………………..Full Article: Source

Fed said to release plan to limit banks’ commodities activities

Posted on 14 January 2014 by VRS  |  Email |Print

The Federal Reserve is poised to take a preliminary step toward limiting banks’ activities with commodities amid Congressional scrutiny, according to three people briefed on the discussions.
The Federal Reserve is planning to release a notice seeking information on ways to curb banks’ ownership and trading of some commodities as it tries to cut risk for deposit-taking banks, said the people, who requested anonymity because the talks are private. Regulators and lawmakers have said raw-materials assets could lead to catastrophic losses, collapses and public bailouts………………………………………..Full Article: Source

Commodities futures: Use hedging tool to reduce your risk exposure

Posted on 07 January 2014 by VRS  |  Email |Print

In the current scenario, the growing economic uncertainty and developments call for a tool or mechanism that can be used by investors to reduce and minimise the risk exposure. Hedging is one such financial instrument that can help you do this. By taking a position in the futures market, which is equal and opposite to the one in the physical market, an investor can trade with the objective of reducing risks associated with changes in price levels.
If an investor has physical material or stock of a particular commodity, he can hedge his exposure to the physical market by taking a reverse and opposite position in the futures market. If a jeweller has an underlying stock, he can sell gold on the exchange platform to safeguard his position against a fall in prices. Hence, hedging can help protect businesses from the adverse effects of temporary price volatility in the commodity markets………………………………………..Full Article: Source

Deutsche Bank talks with buyers for its uranium business

Posted on 20 December 2013 by VRS  |  Email |Print

Deutsche Bank AG is holding preliminary talks with potential buyers of its uranium trading business - the first sign since announcing it was largely exiting commodities trading that parts of the operation are now on the block.
The bank’s uranium desk is one of the biggest third-party traders in the market, and holds substantial stockpiles of low-grade uranium, known as yellowcake, and numerous long-term deals with nuclear power plants………………………………………..Full Article: Source

Insurers eye opportunities in commodity trade finance

Posted on 20 December 2013 by VRS  |  Email |Print

European insurers are investing in commodity trade finance (CTF) as they look for new ways to increase yield and diversify their short-dated investment portfolios.
CTF is an umbrella term for a wide range of assets used to finance the production and transportation of physical materials around the world, secured by the underlying commodities themselves. The current size of the market is $18 trillion………………………………………..Full Article: Source

The ins and outs of banks and commodities

Posted on 19 December 2013 by VRS  |  Email |Print

For commodities traders, it would seem something else is certain apart from death and taxes: banks’ repeated entry into, and exit from, the commodities trading world. When Benjamin Franklin famously said that the only things that are certain in life are death and taxes, he clearly wasn’t thinking about the commodity business. For commodities traders, it would seem something else is certain: banks’ repeated entry into, and exit from, the commodities trading world.
Around the world, for two decades, banks have entered commodities with great fanfare. And then, many times, they’ve also exited, sometimes with their tails between their legs, citing various reasons for their departure. Catalogue of entrants History shows that some banking forays into base metals trading have not lasted………………………………………..Full Article: Source

Hedging not all bad for gold miners in 2013

Posted on 17 December 2013 by VRS  |  Email |Print

Despite aggressive downward lurches in the gold price in recent years, gold miners remain reluctant to hedge their gold production.
The majority of new hedge books opened since gold’s nominal peak in 2011 have been imposed by lenders or motivated by tactical cash flow concerns. London-listed Shanta Gold and Australia’s Evolution Mining have both used hedging this year, but only as a ‘last-dollar’ funding technique, used to bring new mines into production, with the majority of their output remaining unhedged………………………………………..Full Article: Source

Global banks go light on commodities

Posted on 16 December 2013 by VRS  |  Email |Print

Deutsche Bank’s decision to quit trading in most commodity markets is another sign of the excess capacity across the commodity-trading sector and likely foreshadows further consolidation over the next two to three years.
Deutsche, rated one of the top five commodity banks globally, will cease trading in energy, agriculture, base metals, coal and iron ore, while retaining its precious metals business and popular index funds………………………………………..Full Article: Source

Banks cut raw-materials staff to fewest since ’09: Commodities

Posted on 06 December 2013 by VRS  |  Email |Print

The biggest banks are employing the fewest commodity traders, salespeople and analysts in at least four years as tighter regulations and the second drop in prices since 2001 spur cutbacks.
Total headcount in commodity units at the 10 largest banks, from Goldman Sachs Group Inc. (GS) to Barclays Plc, stood at 2,290 at the end of September, about 4 percent less than at the end of 2012, according to data starting in 2009 from Coalition, the London-based analytics company. Pay for those workers may drop 13 percent on average this year, a fourth straight decline, said Options Group, a recruitment company………………………………………..Full Article: Source

Back to the future? Hedging on agenda as gold prices fall -GFMS

Posted on 06 December 2013 by VRS  |  Email |Print

Selling gold that has yet to be mined to lock in a fixed price - a practice used by mining firms that went out of vogue as prices surged - may make sense for them again after a more than 20 percent drop in prices this year.
Hedging, or selling production forward, shields mining companies from falling prices but stops them benefiting from gains. It fell out of favour during gold’s 12-year bull run, which peaked in 2011 with prices near $2,000 an ounce………………………………………..Full Article: Source

Are we closer to hyper inflation?

Posted on 27 November 2013 by VRS  |  Email |Print

Among the alternative financial press (the so-called bloggers of finance) there is a renewed buzz regarding a slowly unfolding crisis. Many believe we are near an inflection point.
The fear is certainly justified. Money or credit creation is now exponential. The US Federal Reserve is on a path toward monetizing anything and everything, while the European Central Bank is about to unleash its own bond buying program………………………………………..Full Article: Source

The case for buying commodities as an inflation hedge

Posted on 18 November 2013 by VRS  |  Email |Print

If you are worried about inflation, then it makes sense to look at investments that have historically performed well during periods of inflation. In a book called “Defying the Market,” authors Stephen Leeb and Donna Leeb research how well investments, including stocks, real estate and commodities, held their value during the 1970s when the CPI averaged a nominal rate of 8%.
A key factor for this increase has to do with negative real interest rates. Whenever a country has negative real rates, meaning the inflationary rate (CPI) is greater than the current interest rate, gold tends to rise in that country’s currency as investors seek a better store of value………………………………………..Full Article: Source

Commodities revenue at top 10 banks seen dropping 14pct this year

Posted on 15 November 2013 by VRS  |  Email |Print

Commodities revenue at Goldman Sachs Group Inc., Morgan Stanley (MS) and the other companies making up the 10 largest investment banks will fall 14 percent this year, according to analytics company Coalition Ltd.
Revenue will drop to $4.7 billion from $5.5 billion in 2012, Coalition said today in a report. In 2013’s first nine months, commodities revenue at the banks slid 18 percent from a year earlier to $4 billion, the report showed………………………………………..Full Article: Source

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