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Commodities Briefing 01.Oct 2008

Posted on 01 October 2008 by VRS |  Email |Print

From FT: “Fiat money, in extremis, is accepted by nobody,” Alan Greenspan, the former chairman of the US Federal Reserve, told lawmakers in Washington almost a decade ago. “Gold is always accepted,” he added.

The “in extremis” scenario was for years only a possibility in the mind of die-hard gold bugs, but the financial crisis is leading regular investors – from the ultra-rich to middle-class savers – to believe that the environment in which Mr Greenspan said fiat money would be worthless is now around the corner. The investors’ response is a rush into physical gold not seen since the second oil crisis in 1979, bankers say. The shift into gold coins and bars is so extreme that it is causing shortages at refineries and mints around the world….. Full Article: Source

Posted on 01 October 2008 by VRS |  Email |Print

From Gulf News: Closer cooperation between Opec and Russia, which between them supply half the world’s oil, could see a bigger political risk premium priced into oil and add more muscle to the producer group’s output policy.

Russia’s desire for deeper cooperation with Opec comes as its relations with the West have deteriorated over issues such as the conflict in Georgia. Moscow has already forged closer ties with Opec price hawks and US foes Venez-uela and Iran. The biggest potential effect on prices would come if Russia joined any move by the Organisation of the Petroleum Exporting Countries to cut supplies, an unlikely step with oil trading near $100 (Dh367) a barrel…. Full Article: Source

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From Guardian: Commodity prices already crushed by financial paralysis and recession fears are expected to lurch lower as investors lose confidence in a sector which only a few months ago promised so much.

The one major exception is gold. Over the past few days investors looking for a place to park assets, away from chaos shrouding financial markets, have flocked to age-old safe haven. The latest trigger for losses is the shock rejection by U.S. lawmakers of a $700 billion rescue package for financial firms. The plan - aiming to help rid banks of the toxic debt on their books — was expected to kick-start activity in money markets, which oil the wheels of economic activity….. Full Article: Source

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From Global Pensions: Commodities continue to be at the centre of the investment debate, while pension funds struggle to diversify their portfolio and include assets uncorrelated to the equities market.

Speaking at the 2008 Mercer European Investment Forum, Jelle Beenen, principal at Mercer Netherlands, strongly advocated pension funds “should have a strategic allocation in commodities”. Comparing equities and commodities’ returns from the 1970s, Beenen pointed out while commodities were more volatile, they provided very high levels of returns, especially when equities did not….. Full Article: Source

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From The Australian: When it comes to oil, gold and base metals, probably the best advice on offer is not to do anything until we see how this turmoil plays out over the week.

Mark Pervan, head of commodity research at ANZ, said the past week or two had shown how easy it was to be wrong about prices for commodities. “The best strategy is to sit for a few days,” he said. Just how testing a time it is for analysts was illustrated yesterday when some ducked for cover and were not prepared to comment….. Full Article: Source

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From Moneyweb: Amid a growing chorus - amid global markets mayhem - that mining stocks are both undervalued and oversold, increasing numbers of hedge funds, like certain kinds of banks, are being weeded out of the system.

In the latest move, a hedge fund has effectively been nationalised by its owners, much as governments may nationalise failing or failed financial entities. London-based RAB Capital overnight Monday won a vote required to freeze redemptions on its flagship hedge fund, which had contracted in value from $2bn in December 2007 to $790m on September 25 this year…… Full Article: Source

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From Bloomberg: Copper will average $5,000 a metric ton in the first quarter, about a fifth less than today, and betting against the metal is one of the lowest-risk trades in commodities right now, Barclays Capital said.

Copper for immediate delivery will average $5,500 in the fourth quarter, and $5,000 in the following three months, Kevin Norrish, an analyst at the bank, said today in a report. “One of the lower risk trades within the commodity sector is to be short copper,” Norrish said…… Full Article: Source

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From Economic Times: With stagnant volumes in agriculture commodities and good volumes in international commodities like gold, silver, crude oil, and copper — brokerages in India are restructuring their focus towards the latter.

This has also been driven by client demand for trade in such commodities which are liquid and extend better returns. International commodities are those which follow global price movements. Since the global financial crisis has hit the equities, bond and real estate markets, investors are looking out for alternative investment options which include commodities. Even on the domestic commodity exchanges good volumes are being churned in bullion, energy and base metal contracts like copper….. Full Article: Source

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From Business Standard: The National Stock Exchange (NSE) has decided to sell the stake that it owns in India’s largest commodity futures bourse, Multi-Commodity Exchange (MCX), said reliable sources.

In fact, NSE has written to MCX, saying it would like to exit from the commodities exchange when the latter do the offer for sale or initial public offer (IPO) next. NSE, which is the largest stock exchange in India, had bought a 2.56 per cent stake in MCX in May 2005, amounting to 1 million equity shares of Rs 10 each at the time. Joseph Massey, chief executive officer of MCX, said that he was not aware of the letter, but added that it is a practice to write to all shareholders asking them whether they want to sell their stake any time the IPO is made….. Full Article: Source

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From Thestar.com.my: The financial hurricane sweeping through global markets has not spared the commodities market, and the outlook remains uncertain for oil and crude palm oil (CPO), but gold looks a more solid bet going forward, analysts said.

CPO futures have slumped more than 50% off its record price of RM4,486 per tonne in March. Yesterday, it fell to an 18-month low with the benchmark December delivery at RM2,090 per tonne….. Full Article: Source

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From Planetark.org: Australia’s coal-powered economy can afford to cut greenhouse gas output by 5 to 10 percent by 2020 through carbon trading, even if global warming will hit it hardest, the nation’s chief climate adviser said.

In his final advice to government on a “practical” emissions regime scheme planned for mid-2010, Ross Garnaut said if Australia cut emissions by 10 percent by 2020, it would cost only 0.1-0.2 percent of yearly GDP growth over the period. “We have a chance, just a chance, to deal with this in a way future generations judge to be satisfactory,” he said….. Full Article: Source

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From Trade Finance Magazine: Concern over what is happening in the US and Europe continues to reverberate around the world and trade and commodity bankers in Brazil, while largely sheltered thus far, understand the need for a rescue package to be agreed in Washington to bring confidence back to the market.

Over the last two days delegates at the 2nd Annual Commodity and Trade Finance Brazil Conference in Sao Paulo have been mulling over the headlines and attempting to contextualise what the news emanating from Washington, New York, London and Paris means for their business….. Full Article: Source

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From Calcuttanews.net: Anil Dhirubhai Ambani Group (ADAG) has become the first large business group to enter the commodity space by acquiring a 10 percent stake in the Ahmedabad-based National Multi-Commodity Exchange (NMCE), the company said.

The requisite approval has been obtained from the ministry of consumer affairs, it said. ‘Our foray into the national commodity exchange space - that is expected to cross an annual turnover of Rs.7.4 million crore ($1.8 trillion) in volumes by next year,’ said Sudip Bandyopadhyay, director and CEO of Reliance Money, an ADAg subsidiary….. Full Article: Source

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From FT: When Oleg Deripaska’s UC Rusal announced last year that it was buying a 25 per cent stake in Norilsk Nickel, investors were delighted. It seemed to be the first step towards joining two of Russia’s biggest metals companies to forge a rival to BHP Billiton.

But Mr Deripaska has collided with Norilsk’s biggest shareholder, Vladimir Potanin, the Russian billionaire, for control of the world’s biggest nickel miner….. Full Article: Source

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Criterion Investments Limited has announced that the Criterion Diversified Commodities Currency Hedged Fund has entered into an agreement with UBS AG to purchase a performance certificate that provides a return linked to the Dow-Jones AIG Commodity Index Total ReturnTM.

The index includes the return on investments in futures contracts for 19 commodities, plus the deemed return on the cash collateral that would be earned by a purchaser of those futures contracts. The initial term of the performance certificate is until October 22, 2008. The purpose of this transaction is to provide the Fund with exposure to a broad commodities index on an interim basis while it continues to seek a long-term commodities strategy….. Full Press Release: Source

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From Huliq: ETF Securities has listed its first exchange traded funds (ETFs) on Euronext Amsterdam. These new ETFs offer access to some of the most important investment themes in world financial markets, such as Water, Coal, Steel, Shipping, Alternative Energy and Nuclear.

ETF Securities will offer two new products based on the U.S. large-cap Russell 1000 Index and U.S. small-cap Russell 2000 Index to European investors. These benchmarks are part of a comprehensive family of widely-used indexes that together serve as benchmarks for more than U.S.$4.4 trillion….. Full Article: Source

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From The Age: The prices of aluminium, copper and nickel slumped as investors feared the ongoing global financial crisis would sap demand for the base metals, analysts say.

On the London Metal Exchange, copper for delivery in three months fell as low as $US6,229 ($A7,828) per tonne - the lowest level since March 2007. Copper has shed 43 per cent in value since striking a record high of $US8,940 ($A11,236) per tonne three months ago. At the same time, aluminium plumbed as low as $US2,404 ($A3,021) dollars per tonne, which was last seen in March 2006….. Full Article: Source

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From Fox44: In finance, safety isn’t what it used to be. After a couple of money-market funds came perilously close to breaking the buck last week, and given the unsettling inflationary prospects of the government flooding the market with additional Treasury notes to finance the Wall Street bailout, investors are re-evaluating what constitutes a “safe haven.”

The yield on the three-month Treasury note dropped to zero on Sept. 18, so great was demand for short-term T-bills by nervous investors fleeing equity and money markets. That was of course before Treasury Secretary Henry Paulson announced plans to take toxic mortgage-backed securities off investment banks’ balance sheets….. Full Article: Source

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From Mineweb: Spot gold prices will rise a modest 6 percent over the next year to around $959 an ounce, as the U.S. dollar weakens and the financial crisis eases, a snap poll of traders, analysts and industry officials showed on Tuesday.

The poll though showed strong gains for platinum and palladium after both metals halved or more since March peaks, even as the deepening financial crisis drives gold back toward the record high of $1,030.80 an ounce hit at that time. Spot gold should stand at $958.60 an ounce by next November, according to the anonymous electronic poll of 196 delegates at the London Bullion Market Association’s annual conference….. Full Article: Source

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From Business Standard: The National Commodity & Derivatives Exchange (NCDEX) has sought approval from the Forward Market Commission (FMC) for its proposed polymer futures.

The exchange is planning to launch three contracts in polymer including polyprolylene, polyvinylchloride and LLDPE. Having been packed in 25 kg pack the aforermentioned polymers’ contract size is 5 metric tonnes and would be traded in Rupee term with a delivery centre at ex-Bhiwandi….. Full Article: Source

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From Commodities-now.com: It is well known that the Kyoto market’s first period (2008-2012) is generally oversupplied with carbon credits from the 39 industrialised countries to take on caps (known as Annex B countries) leaving the overall market long.

However, within this overall picture of length, eleven countries are expected to be short, leaving a ‘Kyoto gap’ they will need to fill either by reducing their own emissions or by purchasing Kyoto carbon credits (in the shape of CERs, ERUs or AAUs). This is the assessment of Point Carbon, the leading provider of market intelligence, news, analysis, forecasting and advisory services for the energy and environmental markets, in its most recent Carbon Market Analyst, entitled The Kyoto Balance: Saved by the AAUs….. Full Article: Source

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From Bloomberg: Platinum fell for a sixth day and headed for its worst quarterly slide since at least June 1987 after car production in Japan showed the biggest drop in more than a decade as exports to the U.S. slowed.

Before today, the metal, used in car exhaust systems and jewelry, had lost 47 percent since June 30. Oil slumped more than $10 a barrel yesterday and U.S. stocks plunged after the rejection of a $700 billion U.S. financial rescue plan increased concern that slowing global growth will slash demand….. Full Article: Source

Posted on 01 October 2008 by VRS |  Email |Print

From IBTimes: Gold rose yesterday on bank failures and systemic fears in Europe and after the US Congress voted against the Paulson and Bush bailout plan (gold closed at $888.40, up $7.20 while silver closed at $12.93, down 45 cents). Subsequently, gold surged in after hours and in early Asian trading rising to over $923/oz.

We are living in incredible, tumultuous and unprecedented financial and economic times and given the extent of the increasingly uncertain outlook for the global equity, property, money, interest rate and currency markets it is surprising that gold prices did not surge by a larger amount…… Full Article: Source

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From Business Standard: Anil Ambani-led Reliance and Kotak groups may soon get the regulatory clearance for their proposed commodity exchanges with Forward Markets Commission looking to finalise new guidelines for preventing conflict of interest in ownership of bourses by October-end.

The regulator has been working on preventing any possible conflict of interest in the event of a promoter of a commodity exchange may have between their roles of running the exchange and other businesses such as broking and trading…… Full Article: Source

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From Istockanalyst: The right to emit greenhouse gases in the Northeast is a little more valuable than expected. That, at least, is one way to read the results of the nation’s first-ever auction of carbon allowances, each of which allows utilities in 10 Northeast states to emit one ton of carbon into the air.

All 12.5 million of these allowances sold in the sealed-bid auction at $3.07 apiece. This price is half as much as was assumed in a UNH study last year and well above the minimum price set by the Regional Greenhouse Gas Initiative….. Full Article: Source

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From Commodity Online: The global credit crisis has had its share of impact on the commodities sector both in India and globally which was not the case in the first half of 2008 when the sector seemed to be insulated from the crisis.

There were major corrections in commodities prices, including precious and base metals and crude oil on Monday. Price of crude oil for October fell nearly 3 per cent on Multi Commodity Exchange. October contracts of base metals lost an average 2 per cent while precious metals December contracts lost just about 1 per cent. Long-only money has shrunk by as much as $50 bn with the sharpest drops in agricultural futures and oil markets…… Full Article: Source

Posted on 01 October 2008 by VRS |  Email |Print

From Reuters: Oil extended its rally and rose over $1 on Wednesday to hover around $102 a barrel, buoyed by hopes that Washington would find a way to pass a rescue plan to head off a deep recession in the United States and abroad.

The U.S. Senate agreed to vote on the bailout package on Wednesday night that will include an increase in the amount of bank deposits insured, a Senate aide said on Tuesday. U.S. light crude for November delivery rose 81 cents to $101.45 a barrel by 1:18 a.m. GMT (9:18 p.m. EDT), after rising as much as $1.60 at the start of electronic trading. The contract settled $4.27 higher at $100.64 on Tuesday in a relief rally….. Full Article: Source

Posted on 01 October 2008 by VRS |  Email |Print

From Financial Post: In a true bear market, nobody makes any money and seasoned investors know that there are no security blankets - global equities, commodities, real estate or emerging markets. Diversification often gets thrown out the window as not even money market funds and gold are immune.

The good news, however, is that across-the-board asset deflation hits everybody and losses of 20% or more bring down the cost of every type of financial asset. “In the short term, in times like these I think there is nowhere to hide,” said Martin Hubbes, chief investment officer at AGF Funds Inc. “But I think that corrects itself very quickly because it obviously creates opportunities for people who are willing to buy.”….. Full Article: Source

Posted on 01 October 2008 by VRS |  Email |Print

From Ibtimes.com: Last calendar year the price of nickel fell by some 40%, and price falls for lead and zinc were not far off that figure either. Ask yourself: did you only once come across the notion that these commodities had now entered a secular bear market?

Sometime during the first months of calendar 2008 global equity markets had fallen to more than 20% off their prior peaks. It was widely reported they were now in a secular bear market. Someone, somewhere must have thought hey, if a 20% fall for equities means they are now in a bear market, surely the same must apply to commodities!?….. Full Article: Source

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