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Commodities Briefing 05.May 2015

Posted on 05 May 2015 by VRS |  Email |Print

Chinese implied oil demand rose 7.7% in the first quarter of 2015, posing upside potential to estimates for this year’s prices. The slowing economy in China likely means the remaining quarters of this year won’t mirror the start of the year. But Barclays analysts Chi Zhang, Miswin Mahesh, Michael Cohen and Warren Russell write:
“Chinese implied oil demand in the first quarter (adjusted for inventories) was up 7.7% year over year, the strongest quarterly growth since fourth quarter of 2012. The momentum has accelerated relative to the 2.4% y/y growth averaged over 2014, helped by rising consumer demand and a weak oil price. Further, the momentum diverges from the trend in underlying economic data during the first quarter period, affecting industrial demand for oil. Real GDP grew by 7.0% y/y, down from 7.4% in the fourth quarter and versus full-year 2014………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

Brent crude oil touched $67 a barrel in intraday trade on Monday, its highest in 2015, as dismal Chinese factory activity enhanced expectations the world’s second-largest economy would roll out stimulus measures to arrest a slowdown.
The North Sea crude variety rose 39 cents to $66.85 a barrel by 1046 GMT, having scaled the 2015 peak of $67 earlier in the session. US crude, which had hit its highest this year at $59.90 per barrel on Friday, inched up by 22 cents to $59.37 a barrel. Brent crude oil has surged by over 40% from an almost six-year low of $45.19 in January on expectations of a tighter demand-supply balance and tension in West Asia………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

Oil supply and demand don’t fully justify the 60 per cent drop in prices between June and January as speculation also played a role, OPEC said. A rise in supply from outside the Organization of Petroleum Exporting Countries at a time when demand for oil was weak was the main reason for the drop, OPEC said in its monthly bulletin on Monday.
Brent oil, benchmark for more than half of the world’s crude, tumbled from mid-June to a six-year low in January as U.S. output climbed to the highest level in more than four decades and OPEC members pumped more barrels. “There was one other important factor that contributed to the downturn, especially as the price decline gained momentum,” OPEC said. “That was speculation.”……………………………………….Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

Despite gold’s inverse co-relation with the dollar, precious metals consultancy firm GFMS predicts a “mild bull run” in gold in 2015. This could happen even when the dollar gains strength after the US Federal Reserve hikes interest rates. Speculations on rising interest rates in the US have been putting pressure on gold price for some time now. GFMS finds that there will be a complex interplay between competing asset classes, like gold and dollar, while the investors will implement fresh strategies.
There appears to be something of a contrarian consensus developing in the gold market. Higher US rates, when they come, will trigger higher gold prices, whereas usually higher interest rates, in a low inflationary environment, would be bad for gold as a non-yielding asset class, GFMS said in the quarterly update on the metal………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

In order to comprehend why the long-term outlook for gold (and silver) is so positive you only have to understand that global debt and balance sheets are set to expand indefinitely. The controllers of the system had the chance to demand that the books be balanced back in the financial crisis of 2008 - 2009, but they weren’t interested - they were much more interested in taking the easy way out and lining their own pockets at the expense of society at large, by printing vast quantities of money which they gifted to themselves, and fleecing savers via zero and now negative interest rates.
They were then able to use their Central Bank generated cash handouts to make even more money by speculating in global property and stockmarkets, and magnify their gains even more via the carry trade………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

The key factor working against gold right now is the imminent rate hike by the US Federal Reserve. “Gold will be a bad asset class once the Fed starts hiking rates. Low inflation and rising interest rates are bad news for gold,” says Kishore Narne, Associate Director, Mo tilal Oswal Commodities Broker.
“The dollar will rise if the US Fed hikes interest rates. So, the outlook for gold is likely to remain bearish for the next one year,” concurs C.P. Krishnan, Wholetime Director, Geojit Comtrade. However, don’t expect a big fall in gold either. “Gold has peaked out in dollar terms. But the geo-political situation is fast changing,” says Jayant Manglik, President, Retail Distribution, Religare Securities……………………………………….Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

The next time you find yourself contemplating, worrying, or wondering with anxiety whether it’s too simple to be true; it is not simple - it’s exceedingly complicated. Not because the fundamentals are all that hard to understand. And not because in principle it is sound personal action in any time period.
But it is complicated because we’ve spent so many years off the rails of sound economic principles that we don’t recognize them when we see them. And the inertia to change is very intense on an unspoken level. Each step we take to make it right–to do what is wise– is met with a startling resistance. Almost an unconscious, collective river moving against progress………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

Silver has continued to consolidate its position, within a very tight trading range, since experiencing a strong selloff a week ago. Despite the bearish pressure,silver has managed to close through some limited resistance at 16.220 and it now appears in the early stages of forming a rising wedge. Considering that the highs are getting higher, it might be time for Silver to retrace some of the gains it lost over the past few days.
Silver has also been under considerable scrutiny of late as JP Morgan has acquired a significant position in the commodity with some analysts suggesting that they are now in a position to corner the market………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

By last month iron-ore prices stood at just a third of their 2011 highs, according to the World Bank’s latest quarterly Commodity Markets Outlook, which was released last week. The iron-ore market has been savaged as new, low-cost supplies have come online — mainly from Australia but also from Brazil — while Chinese demand growth is reducing as China’s economy slows. The steel industry consumes almost all of the world’s iron-ore output and China now produces half of its steel.
Not surprisingly, then, the market hangs on every twist in the Chinese economic saga — which is why speculation in recent weeks that China’s authorities might take extra steps to stimulate the economy has helped to cause a sharp bounce in the iron-ore price globally, and an even sharper jump domestically in the share price of SA’s largest iron-ore producer, Kumba Iron Ore………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

Mick Davis hasn’t spent a cent of his $6bn, but private money and non-mining players’ share of M&A has already doubled in less than three years. In 2014 the number of mergers and acquisitions in the mining and metals industry doubled from the year before according to data from research company SNL Metals & Mining.
It was far from a bumper year though. At $21 billion deal values were less than half 2012’s tally according to the authors of the report Nick Wright and Mark Ferguson. It also pales against the heady pre-financial crisis days when mining M&A came within shouting distance of the $100 billion mark………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

Goldman Sachs Group Inc. is in talks to sell its Colombia coal mines at a loss, according to people familiar with the negotiations, Ianthe Jeanne Dugan reports. Goldman faced protests, falling coal prices, an environmental law and the Federal Reserve considering limits on the ways commercial banks can produce, store and sell raw materials, as it struggled to make the investment pay off.
A deal in the wake of Goldman’s sales of power plants and an aluminum-storage business would mark the end of the bank’s rough experience as a producer of raw materials. But it plans to continue trading raw materials and related financial instruments and making a market in commodities for its clients. Its commodities operations represented about $1.5 billion in revenue in 2013, down from about $3.4 billion in 2009………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

Liquidity worries have bubbled up lately in the world of exchange-traded funds, meaning heebie-jeebies about the tradability of certain ETFs. So here’s a look at that oft-mentioned worry, as well as four other fears.
Sure, ETFs can be low-cost, diversified investing vehicles that track broad market indexes. But you’re no psycho to worry about their relatively quick rise to become a $3 trillion force in global financial markets—or if you fret about the more esoteric funds………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

ETFs — exchange-traded funds — have exploded in popularity in recent years. A basket of multiple companies, bonds or commodities, ETFs give investors exposure to a given sector, commodity or currency. It’s also possible to short sectors, commodities, etc. with ETFs. If you’re trading with the current trend, ETFs offer the potential to make a lot of money. They also tend to be less volatile than individual stocks.
However, you need to be careful not get caught in a trend change — when an index that has been moving in a particular direction suddenly changes course. You also have to make sure you’re not holding leveraged ETFs, ones that use financial derivatives and debt to amplify the returns of an underlying index, with high expense ratios for long periods of time………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

Out of all the potential investments in the universe, oil might be the most difficult to predict at this point in time, but only for geopolitical reasons. If you eliminate the geopolitical factor, oil would undoubtedly move lower.
There are several reasons for this, which include slowing growth in China (a major factor), the threat of deflation in Europe and Japan (temporarily being staved off by monetary policies), the rise of the U.S. dollar, and members of the Organization of Petroleum Exporting Countries (OPEC) being hesitant to cut production. However, geopolitical tensions do exist and there is so much tension around the world that there is definitely potential for an unexpected event to lead to a spike in oil prices………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

The WisdomTree Europe Hedged Equity ETF and the Deutsche X-trackers MSCI EAFE Hedged Equity ETF are the most popular ETFs year-to-date, gathering a combined $22 billion in fresh net assets so far. That’s roughly $1 of every $3 finding its way into the ETF market this year. Behind that enormous investor appetite for these two funds is concern that the dollar strength in the past few years risks wrecking returns for U.S. investors who own international equities funds.
The problem has been thorniest for U.S. investors interested in value plays in the downtrodden eurozone. After all, the euro has slid 7 percent so far this year, and by nearly a fifth in the past year. Owning a fund like HEDJ that peels out this currency cross has saved U.S. investors a lot of pain………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

Long pegged as a currency manipulator, China might be about to get a big stamp of foreign-exchange credibility. The International Monetary Fund is reportedly close to calling the Chinese yuan fairly valued. That’s something that hasn’t happened in more than a decade, and it would come despite opposition from the White House, according to the Wall Street Journal.
China’s foreign-exchange reserves are falling, a signal that it’s not intervening as much to keep its currency weak to bolster exports. Its holdings of US government debt are falling, too, which shows that whatever US dollar reserves it does have aren’t being parked in Treasury debt to the extent that they used to be. In fact, Japan recently has overtaken China as the leading foreign holder of US debt………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

In a world of weak domestic demand in many advanced economies and emerging markets, policy makers have been tempted to boost economic growth and employment by going for export-led growth. This requires a weak currency and conventional and unconventional monetary policies to bring about the required depreciation.
Since the beginning of the year, more than 20 central banks around the world have eased monetary policy, following the lead of the European Central Bank and the Bank of Japan. In the eurozone, countries on the periphery needed currency weakness reduce their external deficits and jump start growth………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

Firms in Europe’s Emissions Trading System (ETS) have swapped a total of 255 million U.N.-backed carbon offsets for European Union emissions allowances (EUAs) from April 2013-2014, data published by the European Commission showed on Monday.
Traders in the EU carbon market watch the swap figure because it can indicate both the current supply of EUAs and the future demand for offsets. The data was due be published at 1200 CEST on Monday but was delayed due to technical reasons, the Commission said on its website………………………………………..Full Article: Source

Posted on 05 May 2015 by VRS |  Email |Print

For years, the debate about efforts to find the best way to rein in greenhouse gas emissions has wrestled with a generation gap: The worst effects of climate change are projected to occur in the distant future over a wide area, but the costs to combat it will be very local and immediate.
A study released Monday in the journal Nature Climate Change is one attempt to bridge that gap. The conclusions suggest that efforts to reduce carbon dioxide emissions from coal-fired power plants in the United States could deliver important regional and local public health benefits………………………………………..Full Article: Source

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