Thu, Jul 30, 2015
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Commodities Briefing 30.Jul 2015

Posted on 30 July 2015 by VRS |  Email |Print

The downward slide in commodity prices is accelerating, surpassing the low reached during the financial crisis in 2008 and reaching a 13-year low. “This is one of the worst months in history for commodities,” said Jodie Gunzberg, global head of commodities at S&P Dow Jones Indices.
The S&P GSCI index, a measure of a basket of 24 commodities, lost 14 percent of its value this month, with nearly every single component trading in negative territory. Indeed, the magnitude of the losses is shaping up to be the seventh worst in 45 years, data from S&P Dow Jones Indices show………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

Canadian investors did pretty well during the rising tide of commodities prices a decade ago, but they are looking for signs of hope these days. With the S&P/TSX energy index down 20 per cent on the year, and the metals and mining index down by nearly a quarter, they could certainly use one or two.
Maybe investors can simply put their faith in the old adage that the cure for low prices is low prices. What’s supposed to happen is that low prices will discourage production and encourage consumption. That will raise prices, eventually. Then demand will inevitably wane in response and producers will overdo production, as they always do. Prices will decline again. It’s the cycle. Rinse and repeat………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

A five-day rout was put to rest yesterday, with a 1% gain for the S&P 500 and other indexes. Dead-cat bounce? The Federal Reserve may chart out the fortunes for this market, depending on what’s in its statement later. Investors will comb through the Fed’s words for clues to a September hike, though they may get fewer hints than they’re hoping for.
But they may stay away from Internet stocks, after Twitter’s earnings call got messy and Yelp disappointed. Can Facebook rally the sector with results later? The pressure is on, as those shares have run up 15% in the last three months. At least the social-media group now has a what-not-to-say-at-your-conference-call blueprint to work off. Here’s what to expect from Facebook………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

Oil price fluctuations between $50 and $65 per barrel are normal because the situation on the world market depends on the level of supply and demand, Russian Energy Minister Alexander Novak said Wednesday.
“I think that the diapason of fluctuations, of which we spoke about before, from $50 to $65 [per barrel] is a normal and expected process and there are no supra-fluctuations that we see. The global situation on the markets depends on supply and demand and in today’s case, this is how it’s unfolding,” Novak said………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

Strong global demand for oil is insufficient to offset a robust supply outlook that has driven prices back below US$50 per barrel, and Saudi Arabia no longer appears to have the necessary market clout to change prices.
“This remains a supply-driven market,” said Michael Tran, a New York-based commodity strategist at RBC Capital Markets. “Supply drove us into this low price environment and supply will have to be what ultimately digs us out.” Tran thinks oil could retest the lows from earlier in 2015, but he thinks WTI prices will ultimately average somewhere in the low US$50s for the remainder of the year………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

Russia has no plans to discuss oil production cuts with OPEC during Secretary-General, Abdullah al-Badri, visit to Moscow on Thursday, Energy Minister Alexander Novak was quoted as saying.
Novak added that he saw no ‘abnormality’ on the oil markets, calling the oil price of between $50 to $65 per barrel as ‘expected’. OPEC decided to keep oil production unchanged, starting the battle to defend its market share. Russia, the world’s biggest oil producer, also refused to take any actions to support oil prices which more than halved since last year………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

Bloomberg’s Vincent Piazza explains the new supply dynamic in the oil market as producers continue increasing output while prices fall. He speaks on “Bloomberg Surveillance.”.………………………………………Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

Lots have been said about the recent decline in gold prices. Most of it deals with the fundamentals of gold itself, such as mine closures, supply and demand, and the like. The rest involves the technical side, such as long-term trends and moving averages. But there are other sides to this story.
For example, gold is usually sought when inflation starts to heat up. When the economy first emerged from the Great Recession, gold rose in price, figuring that inflation would eventually rise — not just from the greater demand for metals and other commodities that usually accompanies a stronger economy, but from all the liquidity that the Federal Reserve had to create in order to push the economy forward………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

On Tuesday gold stabilized but hovered near five-and-half year lows struck last week after a closely watched report showed global gold demand at the lowest in six years , followed by a prediction of a 30% fall from today’s levels.
Futures contracts in New York with August delivery dates were exchanging hands for $1,095.10 an ounce in after hours trade on Tuesday and flat compared to yesterday’s close in another day of light trading as anxious investors look for fresh direction for the metal………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

Since around mid-June, gold prices have come under substantial selling pressure. One of the main drivers behind this fall has been the on-going debate about interest rates. While the general narrative supposes that higher interest rates will have a negative impact on gold, I have often stated that this assumption is not correct.
The historical record shows that gold tends to rise with nominal interest rate rises – as was seen from 2004 to 2008 and in the 1970s – and the Fed is unlikely to raise rates in any meaningful way while deflationary forces persist. According to the WGC, although higher interest rates would make the dollar more attractive to investors looking for higher-yielding assets, the current narrative that this scenario would be bearish for gold is incorrect………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

HSBC has significantly downgraded its 2015 average gold price forecast, following the brutal sell-off seen in the market one week ago. HSBC now predicts that gold will average $1,160 per ounce in 2015 from $1,234 previously. The bank has also lowered its 2016 forecast by five percent from $1,275 per ounce to $1,205.
Nonetheless, the bank still believes that in the end, gold will recover from current levels, it said. Gold recently slumped to levels not seen since March 2009 at $1,077 per ounce, following a bear-raid on the market during early trading hours in Asia and what was the most illiquid period of business in the week………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

The world market was awash with a swarm of gold bugs after the financial crisis of 2008. Gold bugs are advocates of investments in Gold as a safe haven and a guard against financial Armageddon, hyperinflation, currency collapses and geopolitical troubles.
A few years ago, gold bugs argued the precious metal was a can’t-miss investment given the ultra-loose monetary policies around the world and the prospect of higher inflation. However, you can’t find many gold bugs as the metal prices have taken a big tumble. The cumulative returns since 2010 for gold HAS almost BEEN nil compared to a return of 70 per cent by Dow Jones Industrial Average and 57 per cent by BSE S&P Sensex………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

After a relatively uneventful few months for the gold market, prices broke out of their six-month range in dramatic fashion last week. Gold’s fall below the crucial USD1,130/oz level has seen the metal trade to a fresh five-year low of USD1,078/oz in recent days. While the market has since gained some composure, we expect further downside to ensue given the significant shift in market positioning.
Market positioning is reflecting a renewed negativity towards gold. While our short-term forecast of USD1,100/oz was met recently, we were surprised at the manner in which it occurred, having previously expected a gradual grind lower………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

The zinc market could run into a concentrate shortfall in the coming months, leading to upward pressure on prices, Investec said Wednesday. “We see the zinc market as one of the few bright spots in the metals market right now given the natural attrition from old mines closing down,” Investec said in a research note, commenting on the decision by Australia’s MMG to push ahead with its Dugald River mine project.
“The development of Dugald River has long been expected but a considerable deficit of concentrate could yet emerge in the market in the next few months — a situation that in our view could lead to a squeeze on the zinc price,” Investec said. On Tuesday, MMG announced approval of an updated development plan for the Dugald River project in Queensland, Australia………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

China’s statistics pose multiple difficulties for analysts, especially since they were called “man-made” by the current premier, Li Keqiang, in a US diplomatic cable. The country grew at 7 per cent in the second quarter of this year according to Beijing, but commodity prices, especially metals, have fallen to some of their lowest price levels in six years.
That is leading analysts to take a new stab at working out just how large the slowdown in commodity demand really is in the world’s biggest consumer. Working out China’s demand is not easy, however. In many cases, data are obfuscated by imports from Hong Kong, a Chinese territory, and the practice of importing metal as collateral to obtain bank loans………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

While other metals markets continue to be mired in negativity, the price of iron ore surged on Wednesday as the market for the steelmaking raw material in top consumer China show signs of a bottom. The benchmark 62% Fe import price including freight and insurance at the Chinese port of Tianjin raced ahead $3.10 or 5.9% to $53.30 a tonne, capping three days of gains according to data provided by The SteelIndex.
The advance in the Metal Bulletin’s benchmark 62%-index at the ports of Qingdao-Rizhao-Lianyungang in China was $2.44 or 4.6% to $55.89 for an 8.7% gain since Friday to a four-week high. The latest move higher was inspired by a bounce back in Chinese steel prices with the most-traded rebar contract on the Shanghai Futures Exchange touching $340 on Wednesday. That’s up from record low of $305 at the start of the month………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

An unexpected dip in U.S. crude oil inventories helped fuel a surge in energy prices and commodity-related exchange traded funds Wednesday. On Wednesday, the United States Oil Fund, which tracks West Texas Intermediate oil, was up 2.7% and the United States Brent Oil Fund, which tracks Brent crude oil futures, was 1.4% higher. USO has declined 22.2% and BNO has decreased 17.5% year-to-date.
Oil prices were rallying Wednesday after the U.S. Energy Information Administration revealed crude inventories fell by more-than-expected 4.2 million barrels last week, or over twenty times expectations for a drawdown of 184,000 barrels, Reuters reports………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

To say that things have been rocky in managed futures recently is putting it mildly. In June, the industry saw its worst month on a performance basis in the past four years. Then yesterday, S&P’s Jodie Gunzberg came out with the following data: “The S&P GSCI has lost 13.6% month-to-date through July 27, 2015, bringing its level to the lowest since February 25, 2002. It has now exceeded the bottom of the 2008 global financial crisis.”
That makes July the seventh worst performing month for the GSCI since 1970. In fact, it’s pretty bad across the board - again Gunzberg: “Every single one of the 24 commodities is negative for the month except lean hogs, which is just barely positive by 18 basis points BUT only when taking into account the positive roll yield; otherwise that is negative too, by 14.5%………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

Russia’s central bank halted purchases of foreign currency to replenish the country’s international reserves, a move that may lay the groundwork for a fifth interest-rate cut this year at a meeting on Friday.
The operations were suspended on July 28 as a result of “growth in volatility on the domestic currency market,” the regulator said in a statement on its website Wednesday. It said currency purchases were reduced to $160 million on Monday from $200 million a day last week. The ruble appreciated as much as 1.4 percent after the announcement, before paring gains………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

Despite its rise in recent days, the Aussie is now seen as close to fair value, but should continue to track the price of key commodities such as iron ore and coal. According to most modelling, the currency’s present level near US73¢ – it was fetching US73.21¢ – clearly reflects the country’s terms of trade, along with the difference in bond yields between Australian and the United States.
When the US Federal Reserve finally lifts its target rate, the local unit is expected to depreciate further, moving closer to US70¢. Any further declines in commodity prices will have the same effect………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

Climate change puts humanity at risk. The Pope’s celebrated encyclical letter on the subject released last month emphasised this risk “for our common home”, arguing that “doomsday predictions can no longer be met with irony or disdain”. But apocalyptic predictions are often made by religious groups. So, how serious is this claim?
Perhaps for the first time in history, there seems to be a broad consensus among scientists. They claim that our planet might face a frightening future if we cannot agree to take decisive actions here and now. Changes to how seawater circulates in the Atlantic, the melting of glaciers on Greenland and in the Antarctic, and rising sea levels might all result from inaction. Accounting for these catastrophic scenarios is a huge challenge for scientists and economists alike………………………………………..Full Article: Source

Posted on 30 July 2015 by VRS |  Email |Print

Some businesses that back President Barack Obama’s plan to curb greenhouse gases are making a late lobbying push to add an element similar to a cap-and-trade program. With the administration set this week or next to unveil its final rules to cut emissions from coal and natural gas plants, groups for companies such as Johnson Controls Inc., Alstom SA and AES Corp. have pressed officials to include a carbon market so that costs don’t surge.
Those programs — a slimmed-down version of a plan Congress debated and failed to pass early in Obama’s tenure — would apply to states that balk at putting rules in place………………………………………..Full Article: Source

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