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Commodities Briefing 08.Oct 2008

Posted on 08 October 2008 by VRS |  Email |Print

From FT: Commodities markets steadied on Tuesday after sharp falls in the previous session as the ongoing storm sweeping global financial markets showed no sign of abating.

Gold rose 2.5 per cent to $879 a troy ounce in late London trading after touching a high of $890.60, supported by elevated levels of risk aversion and safe haven buying. Gold prices have risen more than 20 per cent since Lehman Brother’s collapse. The world’s largest gold exchange traded fund, the New York-listed SPDR Gold Trust, said its bullion holdings rose to 744.54 tonnes by late Monday, up 4.59 tonnes from Friday, but still below a record high of 755.26 tonnes hit last week….. Full Article: Source

Posted on 08 October 2008 by VRS |  Email |Print

From Forbes: Investors have been selling commodities to reduce risk and raise cash over the past three months, a process known as deleveraging, amid the global financial crisis.

Commodities had attracted fund money earlier this year as a hedge against the weak dollar and inflation. Commodities have been rallying for six years due to surging demand for them in emerging economies, such as China…… Full Article: Source

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From AFP: The UN food agency cast doubt Tuesday on the potential of biofuels to help reduce greenhouse gas emissions while warning that their development threatens food security.

“The expanded use and production of biofuels will not necessarily contribute to reducing greenhouse gas emissions as was previously assumed,” Food and Agriculture Organisation Director General Jacques Diouf told a news conference. The FAO also warned that massive subsidies in wealthy countries limit opportunities elsewhere to profit from the boom in biofuels…… Full Article: Source

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From Reuters: The sell-off in grains as part of a broader flight of investment money from commodities could continue through year’s end due to the expanding credit crisis, with any global recession taking a bite out of demand.

U.S. grain prices have likely not bottomed, despite their recent slide, with the U.S. harvest getting into gear, uncertainty over demand for corn from the ethanol sector and a rising dollar that could hurt export competitiveness. But of particular concern to traders in the grain market is the path investment money from investors like index funds will follow….. Full Article: Source

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From The Age: Alumina, BlueScope Steel, OneSteel and Qantas are among the companies that would be hardest hit under a proposed carbon price of $20 a tonne, according to a report.

Almost three-quarters of companies in the S&P/ASX 100 Index participated in the sixth annual Carbon Disclosure Project survey, which incorporates 385 institutional investors with $US57 trillion ($A79 trillion) under investment. The report took the emissions data of the companies that participated and factored in the effect that carbon at $20 a tonne would have on their business….. Full Article: Source

Posted on 08 October 2008 by VRS |  Email |Print

From Inside Futures: Many clients have been asking me how to use options to protect long commodity positions, especially given the recent strength in the U.S. dollar and the pullback in the energy markets.

We have seen market conditions that carried through all spring and summer suddenly turn, and trends shifted. Many traders without appropriate risk-management strategies saw profits erode on their long- term positions. …. Full Article: Source

Posted on 08 October 2008 by VRS |  Email |Print

From Indexuniverse: Exchange-traded funds continued to grow in prominence as part of the overall U.S. equities market in September, reaching 35% of all trading, up from the previous record level of 31%, just reached in August, according to National Stock Exchange data.

The biggest part of that trading story has been State Street Global Advisors’ SPDRs family of ETFs, which for the month of September represented approximately 50% of all ETF trading volume, with close to $1.4 trillion of the nearly $2.8 trillion in ETF trading volume. Year-to-date, the SPDRs also represent approximately 50% of ETF trading volume ($8.8 trillion), with Barclays Global Investors’ iShares family a distant second at $3.75 trillion. …. Full Article: Source

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From Mondovisione: The Exchange is planning to introduce a new trading system in May 2009. Modifications of rules and regulations in a new system have been already released in the article of June 25, 2009.

However, participants and customers are invited to keep in mind some of the more detailed modifications summarized below. …. Full Article: Source

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From Portfolio: Do you remember the food and commodity bubble? Sure you do. It wasn’t that long ago. The rise of India and China was inexorable, and the supply of food in general and meat in particular was never going to keep up with demand.

As a result, a formerly-sleepy outfit known as Potash Corporation of Saskatchewan did a Nortel and briefly became the most valuable company in Canada. Not any more. In three-and-a-half months, the company has gone from the most valuable in Canada - worth $77-billion at its apex - to losing its place in the top 10, standing at [Thursday's] close at No. 11, worth $31-billion. …. Full Article: Source

Posted on 08 October 2008 by VRS |  Email |Print

From Investment Markets: Crude oil prices were up Tuesday after falling for four consecutive session as comments from officials of member nations led investors to believe that the Organization of Petroleum Exporting Countries could cut production due to recent price declines, but prices fell from session highs after it turned out that Iran had forced a plane belonging to a European aid agency to land.

West Texas Intermediate crude for November delivery added $2.46 to $990.27 per barrel on the New York Mercantile Exchange while November contracts for Brent crude gained $1.39 per barrel on the ICE Futures Europe exchange in London…… Full Article: Source

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From Business Standard: Market regulator, the Securities and Exchange Board of India (Sebi), today said that India needed to graduate from over-the-counter to exchange traded platform in derivatives trading to provide transparency, better execution and liquidity.

“We have to move progressively to the exchange-traded platform from OTC to provide transparency, better execution and liquidity,” Sebi’s Executive Director, Manas S Ray said. Sebi would have a relook at the regulatory mechanism, he said. …. Full Article: Source

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From IBTimes: The EUR USD rallied on Tuesday as the Federal Reserved announced a plan to buy commercial paper. This action amounts to a direct loan to businesses which puts taxpayers at risk.

The announcement of the plan almost immediately triggered buying in the EUR USD as traders perceived this as a gesture that could weaken the Dollar. The EUR USD also strengthened during a talk by Bernanke when he made comments which open the door to a possible interest rate cut. Look for traders to continue to buy Euros if the Fed goes ahead with its current plan to buy commercial paper….. Full Article: Source

Posted on 08 October 2008 by VRS |  Email |Print

From Landlinemag.com: There may be some good news for cash-strapped truckers as retail diesel prices are projected to drop 10 cents per gallon to average $3.91 in 2009, the U.S. Energy Information Administration reported on Tuesday, Oct. 7.

According to the EIA’s Short-Term Energy and Winter Fuels Outlook report, while oil prices are expected to be up slightly on average in 2009, the decrease in the average price for diesel reflects a “weakening of the very high wholesale distillate-crude oil price margins seen this past summer.” As the winter fuel season began Sept. 30, distillate inventories that include diesel and home-heating oil were an estimated 122 million barrels, down 12 million from 2007 averages….. Full Article: Source

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From Guardian: Influential EU lawmakers sought in a key vote on Tuesday to ease the cost for factories of meeting greenhouse gas emissions limits from 2013 as much of Europe heads for recession.

But the European Parliament’s environment committee backed an EU executive Commission plan to wipe out utility windfall profits from carbon trading and transfer up to 30 billion euros ($40.76 billion) to member state coffers. Factories and power plants participating in the EU emissions trading scheme (ETS) get most of their carbon permits free now…… Full Article: Source

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From Commodities Now: ETF Securities Limited, the global pioneer of exchange traded commodities (ETCs), experienced large inflows into physically backed gold and silver ETCs last week as investors sought safe haven assets.

Physically backed gold ETCs saw $93 million of net inflows in the past six days, the largest weekly increase during the last 10 weeks. Silver also saw net inflows. Physical gold ETCs now total $4.5 billion or 5.3 Moz. Physically backed gold ETCs most traded ETC last week and year-to-date….. Full Article: Source

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From Tehran Times: What’s going to happen in the long term? Here are five reasons Oil will go much higher, and maybe sooner than we think. First, global demand is accelerating. The U.S. Energy Information Administration (EIA) said demand will reach more than 115 million barrels per day by 2030.

T. Boone Pickens has recently brought to light the term supply and demand problem. Pickens said, “85 million barrels of oil is all the world can produce and the EIA fourth quarter predicts 87 million barrels in demand”. Pickens went on to say supply will not meet demand so the price must go up. Second, production has probably peaked at nearly 90 million barrels a day….. Full Article: Source

Posted on 08 October 2008 by VRS |  Email |Print

CME Group and Citadel Investment Group, L.L.C., a leading alternative investment and technology firm, has announced they have executed a non-binding term sheet to launch a joint venture company within 30 days, which will be the first electronic trading platform that is fully integrated with a central counterparty clearing facility for Credit Default Swaps (CDS). CME Clearing, the world’s largest derivatives clearing house, will be the central counterparty for this solution.

The joint venture will operate as an independent organization with its own board of directors and management team. CME Group and Citadel have invited major CDS market participants to join as Founding Members by allocating up to 30 percent of the equity in the venture, and by offering certain market maker privileges to such Founding Members. The equity and market maker incentives are designed to encourage participants to both migrate existing positions and to trade new CDS contracts on the platform….. Full Press Release: Source

Posted on 08 October 2008 by VRS |  Email |Print

From Bloomberg: Gold rose for the second straight day on speculation that central banks will cut borrowing costs to ease a credit crunch, boosting demand for the metal as an alternative asset. Silver also gained.

Interest-rate futures show a 64 percent chance the Federal Reserve will reduce its benchmark rate by 50 basis points to 1.5 percent by Oct. 29, compared with a 42 percent chance yesterday. The European Central Bank has indicated that policy makers may cut rates from a seven-year high. Gold rallied to a record in March after the Fed slashed borrowing costs over seven months….Full Article: Source

Posted on 08 October 2008 by VRS |  Email |Print

From Guardian: The safe-haven yen edged up against the euro and other major currencies on Wednesday as investors feared more global financial and economic damage from the deepening credit crisis.

Federal Reserve Chairman Ben Bernanke’s signal that an interest rate cut is coming shortly, along with a new Fed facility to help unfreeze money markets, did little to reassure market players fretting about more trouble ahead…… Full Article: Source

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From Bloomberg: Platinum rose above $1,000 an ounce, extending yesterday’s gain, on buying by investors seeking alternatives to currencies, stocks and bonds amid a spreading credit crunch. Palladium fell.

The financial crisis wiped out more than $6 trillion from U.S. equities in the past year, Bloomberg data show. Some investors buy precious metals including platinum during financial-market upheavals to preserve value. The dollar fell as much as 1.3 percent against a weighted basked of six major currencies including the euro and yen…… Full Article: Source

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From Commodities Now: Dubai Gold & Commodities Exchange (DGCX) has announced that year to date volume has for the first time, passed a record-breaking one million contracts, up 52 per cent on last year. Higher trading activity was led by currencies, precious metals and crude oil.

Valued at US$ 52 billion, YTD volumes at 1,020,000 demonstrate increasing investor preference for DGCX. The milestone was supported by the recent record performance in the third quarter with 385,000 contracts traded, valued at US$ 20.5 billion…… Full Article: Source

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From Dawn: While commodity prices have always risen and fallen with fluctuation in supply and demand, the world agriculture now appears to be undergoing a structural shift towards a higher demand-growth path, according to the ‘State of Food and Agriculture 2008’ released by the Food and Agriculture Organisation (FAO).

Many countries, especially in Asia, have entered a period of faster economic growth that is generating strong demand for higher-quality diets, including more meat, dairy products and vegetable oils. The rise in demand arising from stronger income growth is certainly welcome news, but higher prices pose challenges for all consumers, particularly the poorest, fears the report…… Full Article: Source

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From FT: Central banks have all but stopped lending gold to commercial and investment banks and other participants in the precious metals market, in a move that on Tuesday sent the cost of borrowing bullion for one-month to more than twenty times its usual level.

The one-month gold lease rate rocketed to 2.649 per cent, its highest level since May 2001 and significantly above its five-year average of 0.12 per cent, according to data from the London Bullion Market Association. Gold lease rates for two, three and six months and for a year also jumped to levels not seen in the last seven years….. Full Article: Source

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From Resource Investor: It is hard to believe, but equity indexes (and futures and options based on them) became a commonly used investment tool only 25 or so years ago. As more and more investors began to apply indexes to their strategies, the demand grew for more indexed products.

Exchanges and index providers obliged by creating hundreds of new ones, and thousands of variations on them. Now that indexes are widely used to create derivatives, it’s useful to recall how they came about. The main factors in this story are innovation, perseverance and success breeding success…… Full Article: Source

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From Merkfund.com: We have been warning for some time that “there is no such thing as a safe asset anymore, you have to take a diversified approach to something as mundane as cash.” Unfortunately, the current crisis shows that we may be right.

Physical gold is attractive to many investors because of its lack of counter party risk. The only counter party risk with gold held in your personal vault is that someone may break in and steal it. However, even staunch gold bugs rarely hold all their net worth in gold, but diversify if for no other reason that it is impractical to have essentially all your net worth in gold…… Full Article: Source

Posted on 08 October 2008 by VRS |  Email |Print

From Business Spectator: The prices of agricultural commodities have fallen in September and October 2008. Luke Chandler of Rabobank says the global financial crisis has affected commodity prices.

Prices are also under pressure from investors liquidating funds from the market….. Full Article: Source

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From Markets Media Online: British banking giant Barclays Capital said Tuesday that it has fully integrated the U.S. foreign exchange and commodities business of failed bank Lehman Brothers Holdings Inc. under the Barclays Capital name.

Barclays bought Lehman’s North American investment banking and capital markets business for $1.75 billion after the storied investment bank declared bankruptcy last month, the only U.S. investment bank allowed to fail thus far…… Full Article: Source

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From NZ Herald: Australian commodity exports have taken a small hit because of the world financial meltdown, but exports should generally hold up, federal Resources Minister Martin Ferguson says.

There had been some indications of a “slight fall-off” in commodities such as coal, and there was some uncertainty in world markets. “Throughout the whole global community, given the events in the United States in recent months, there is a question mark in all of our minds about what is occurring,” Ferguson said in Queanbeyan, New South Wales……. Full Article: Source

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