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Commodities Briefing 02.Feb 2009

Opalesque unites Fusaro, Prof. Siry and Sona Blessing for Carbon Led Investing Webinar
Opalesque Exclusive: Tiberius sees mixed outlook for industrial metals this year, market surplus to be slightly stable
Davos finds no answers to crisis
Int'l co-op prerequisite for global financial system reform
Barter beware
Commodities markets manipulated: Saxo Bank
Economies relying on commodities to find going tough
Commodities a longer-term good bet
Changing commodities markets impact traders and systems
Rising commodities, falling stocks & risk reward ratio
Commodity flux and China’s Africa strategy
Oil rises near $42 on strike threats, eyes US data
Pressure on Opec welfare spending
Green investments get pruned
Funds for renewable energy running out quickly: critics
BP attacked for watering down EU green agenda
Gold futures may rise
Rerating gold - upwards momentum building?
Commodities slide puts BHP Billiton in a hole
Gallium: A slippery metal
Shanghai copper falls after holiday, follows London’s declines
'Happy times' over for aluminium, Russian tycoon says
Commodities gathering strength building on U.S. dollar weakness
Gordon Brown rules out support for the UK currency
Zimbabwe to cut 10 zeros off currency
Taiwan dollar off 4-yr low on foreign fund inflows
ETFs can be bubble buddies
More money needed for ETS compliance, energy industry says
Dubai oil exchange switches to CME trade platform
Reliance Money plans SME exchange
MCX eyes equity bourse
India set for a record with tea e-auction
Forecast signals end of cheap food era
How greedy speculators control commodity prices
Similarities between commodities market and poker
Hedge fund star Einhorn now invests in gold, Gold and oil seen as the best commodities in 2009

Posted on 02 February 2009 by VRS |  Email |Print

Opalesque A SQUARE (”Alternative Alternatives”), still the world’s first and only publication and independent research portal dedicated to alternative alternatives, has drawn leading experts in the field of carbon management for an interactive webinar on Feb. 11th, 2009 16.00 Swiss time, 10.00 am (EST):

Peter C. Fusaro, Chairman, Global Change Associates - Energy and Environmental Consulting and engaged in the process at the US federal level

Professor Jacek P. Siry, a specialist in carbon sequestration issues, at The Center for Forest Business, Warnell School of Forestry and Natural Resources, University of Georgia

Moderator Sona Blessing, Director of Research, Opalesque Ltd

The experts will share insights and perspectives based on their “hands-on-experience” in this space and will address the following:

· Carbon emissions - facts, figures, fantasy
· Carbon sequestration
· How investible is it as an asset class?
· Could carbon become the biggest of any derivative product over the next 4-5 years?
· Cap and trade as a mechanism
· Carbon compensation: growing, cultivating, harnessing forests, other offsetting methods
· Pricing carbon emissions - the mechanics
· The prospects for carbon trading post 2012
· Role of the US - shifting from a voluntary to a compulsory system

Agreeing on a global regulatory framework - how realistic?

The EU endorsed a plan in December 2008 to reduce the 27-nation bloc’s greenhouse gas emissions by 20 per cent from 1990 levels by 2020
Member states and other developed countries are urged to increase that figure to 30 per cent – how realistic is this?

A SQUARE subscribers can confirm their participation in this webinar here: http://www.opalesque.com/index.php?act=static∧=webinar. In order to participate, you are formally required to register to confirm your attendance.

Non-subscribers to A SQUARE can set up their subscription here: http://www.opalesque.com/main.php?act=registration and participate for free in the webinar. See here for A SQUARE subscription rates: http://www.opalesque.com/main.php?act=A2Rates.

Non-subscribers can also purchase an admission pass for this webinar here: http://www.opalesque.com/index.php?act=static∧=webinar ($80 admission).

The Panelists:

Peter C. Fusaro is Chairman of Global Change Associates, a financial services advisory in New York, and the best selling author of What Went Wrong at Enron and 14 other books on energy and the environmental financial markets. He is an energy industry thought leader noted for his keen insights in emerging energy and environmental financial markets and has been at the forefront of energy and environmental change for over 30 years focusing on oil, gas, power, coal, emissions, carbon trading and renewable energy markets. He coined the term “Green Trading“ and co-founded the Energy Hedge Fund Center LLC.

Jacek P. Siry, serves as associate professor of forest economics at The University of Georgia’s Center for Forest Business.

He has expertise and experience in forest carbon sequestration, forest industry competitiveness issues including timber trade, availability and cost, that span the world’s major producing regions. He has a Ph.D. in Natural Resource Economics and Forest Policy, University of Georgia

About A SQUARE:
Opalesque A SQUARE = Alternative Alternatives is the first web publication, globally, that is dedicated exclusively to alternative investments. A SQUARE’s weekly selection feature unique investment opportunities that bear virtually no correlation to the main stream hedge fund strategies and/or distinguish themselves by virtue of their “alternative” motive - social, behavioural, natural resources, sustainable /environment related investing.

With its “research that reveals” approach, fast facts and investment oriented analysis, A SQUARE offers diversification and complementary ideas for: private, high net-worth and institutional investors, pension funds and endowments, portfolio and hedge funds managers. For more information please go here: http://www.opalesque.com/index9.html.

Opalesque has been publishing Alternative Market Briefing, the premium news service on hedge funds and alternatives, since February 2003. Opalesque was runner-up at the State Street Institutional Press Awards 2008 in the well contested category of most innovative media outlet. Opalesque’s weekly 600,000 issues of its eight web-based publications are read in over 130 countries. For more information, please go to http://www.opalesque.com.

Posted on 02 February 2009 by VRS |  Email |Print

From Komfie Manalo, Opalesque Asia: Switzerland-based commodity funds house Tiberius Asset Management AG released a report entitled ‘Capital Markets Outlook 2009’ last week. The report forecasts 2009 will be a “transition year” for the industrial metal sector, and added surplus in supply and deviation in prices will not be significant.

Demand for metal
The growth in global industrial production dictates demand for industrial metals. The economic slowdown, particularly in the 4th quarter of 2008 caused demand for industrial metal to decline. After driving the LMEX Index of the London Metal Exchange (LME) to a high of 350% growth from 2002-2007, the sector expanded to just 2% in 2008.

According to the Tiberius forecast, 2009 is poised to register a negative demand growth for the sector, unless major emerging companies, such as Brazil, India and China show some economic recovery to reverse the scenario.

The global recession has also revealed significant market surpluses which caused exchange inventories of industrial metals to increase. The credit crisis also added to the drastic build-up of exchange inventories.

During boom years, many industrial companies try to hold large internal inventories hoping demand will rise. Also, investors intentionally hoard physical inventories to reduce available supplies.

But the report sees the inventory build-up for most industrial metals have already peaked. Tiberius expects inventories surpluses to still be around at least until the middle of 2009.

Supply
Prior to the economic collapse in 2008, industrial metal producers were enjoying record profits which triggered a boom in mining explorations and a surge in production levels. Explorations were particularly high for some metals, particularly nickel and zinc, except copper, because of the complexity of the mining projects involved.

To counter over-productions, many mining firms initiated drastic measures to cut production, from shutting down projects to halting new explorations in late 2008, as the current low price level for some metals made production unprofitable.

Production levels for nickel, for example, were trimmed by roughly 7% last year and by about 16% for 2009.

Market balances
There is no doubt the growth shock in 2008 caused market surpluses in the industrial metal sector to balloon in that year. However, any deviations in prices should be modest in 2009. The key factor will be how fast inventories are drawn down, according to Tiberius.

Historically, industrial metals have had higher average roll yields than other sectors. And this was shown by the positive roll yields from 2005-2008. Improved roll yields of industrial metals have an annual performance advantage of 5% to 10% over a long-term horizon because of metals’ ease of storage, imperishability, and cyclical scarcity.

Trends in currency are also seen to effect industrial metals. Tiberius says that a decline in the U.S. dollar will increase production costs.

Individual analysis of industrial metals

Aluminum
The glut in aluminum supply reached 1.5m tons in 2008 mainly in LME’s North American warehouses, due to the fact that North American carmakers are faced with sales crisis. Some automakers in the region are on the brink of insolvency. The metal also saw its value sliding by 40% in 2008 compared with the previous year.

In 2009, aluminum surplus is projected to be at 1m tons because of the weakness in the transport sector. Tiberius said 2009 does not offer a promising opportunity for aluminum over the next 12 months. However, prices could hover in the vicinity of $1,500 per ton.

Copper
Copper was the last industrial metal to be affected by the economic slump mainly because of repeated acts of nature, such as weather, earthquakes, labor strikes and project delays. However, copper inventories began to rise in the second half of 2008 and prices started to fall. The price of copper settled just below $3,000 per ton in December.

According to Tiberius, there is no reason to cut back on copper production because there was no surplus in supply. Price is seen to trade between $2,500 and $3.500 per ton this year and could rally strongly in 2010 because of below-average inventories.

Nickel
Nickel has a large current surplus owing to the decline in the global steel production. Some 90% of the demand for nickel comes from the steel sector. The metal’s price fell 80% from its previous high. Mine operators have drastically cut their output while many new mining projects presented in Tiberius’ 2008 Capital Markets Outlook have been suspended.

Tiberius sees nickel surplus to continue this year, but said the market will not fall below the October 2008 levels. The report even indicates a double-digit demand growth for 2010.

Zinc
The report suggests a massive scale-down in zinc production as producers are under sever pressure to cut costs. Famous mines, including Broken Hill or Golden Grove, will have to scale back output. Teck Cominco’s Lennard Shelf operation has even been shut down entirely ahead of schedule.

Zinc surplus this year is projected to be between 250,000 and 300,000 tons because of weak demand for galvanized steel, one of the main end-uses for zinc. And the weak demand for zinc is forecasted to stretch up to 2010. However, Tiberus says the current price of $1,200 per ton is expected to stabilize at that level and not fall below $1,000 per ton.

Lead

The lead market will probably exhibit a small surplus in 2009. However, Tiberius admits that the underlying fundamentals are difficult to ascertain. LME inventories fell from about 100,000 to 45,000 tons in the second half of 2008, which may be at least partially due to seasonal factors.

75% of the demand for lead comes from the transport sector, particularly from producers of batteries. Since sales of new vehicles have plunged in the past months, there is little opportunity for the lead market. Moreover, the development of hybrid and electric cars will not drive the demand for lead, since the batteries employed are based on nickel/metal-hydride or lithium/ion systems.

Tin

The market for tin shrunk in 2008. The metal is used mainly as a welding metal in the electronics industry, which was also hit hard by the economic slump. Tiberius sees a slight market surplus for tin this year. But prices will remain comparatively high, so manufacturers will try to produce as much as they can.
Full report: Source

To subscribe to Opalesque’s free daily briefing on commodities, click on ‘Commodities Briefing’ (and uncheck other options) here:
Article Source: http://www.opalesque.com/index.php?act=registration

Posted on 02 February 2009 by VRS |  Email |Print

From BBC: The World Economic Forum has ended with a call to rebuild the global economic system. Founder Klaus Schwab announced a “global redesign initiative” to reform banking, regulation and corporate governance.

For five days, more than 2,000 business and political leaders discussed what some here called the “crisis of capitalism”. However, most discussions described the problems, not solutions….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Xinhua: International cooperation, not protectionism, is the precondition for global financial system reform, world leaders and financial experts told this year’s World Economic Forum Annual Meeting, held here from Jan. 28 to Feb. 1.

During the five-day forum, participants sent a strong message to combat financial protectionism. British Prime Minister Gordon Brown warned that financial protectionism is a greater danger than trade protectionism in the current world economic scenario. …. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From FT: Before all else, a government must safeguard the basic needs of its citizens. Yet, from north Africa to China, and from Russia to south Asia, governments have started entering into a secretive web of barter deals as a substitute for global commodities markets, because the financing for the international food trade is drying up or becoming too expensive.

This is a dangerous trend that rich and poor countries must work to reverse. It is understandable that foodimporting countries use any available means to secure supplies. Being cut off from trade puts too much pressure on domestic food markets….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Business24-7.ae: Commodities markets were heavily manipulated in 2008 and much of the demand created in the year was artificial, a European investment bank said in its latest report.

Saxo Bank, a Copenhagen-based investment house, said the charts showing the demand for commodities may have had inflated figures….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Business24-7.ae: Commodity driven economies will experience limited access to funds, reduced cash flows for business and rise in credit losses, a senior banker said.

“Real commodity driven economies will experience limited access to funds, increased cost of procurement of funds, weak securities market, reduced cash flows for businesses, rise in credit losses, increase in balance sheet risks due to asset price deflations, lower profit levels among businesses, volatility in commodities market, reduction in trade freedom, more government intervention and shifts in consumer behaviour,” said R Seetharaman, Chief Executive Officer of Doha Bank….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Moneycontrol.com: Jay Moghe, Managing Partner at Asian Alternative Consulting believes that longer-term commodities are a good bet for Asian investors because the underlying demand for commodities from larger economies like China and India is still there and hasn’t disappeared.

You saw some numbers on Friday from the Baltic Freight Index which is often been seen as harbinger of economic fortune and there was reasonable up tick in the Baltic Freight Index which is an indication of dry good bulk shipping that seems to show there some activity within the shipping and commodities markets….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Commodities-now.com: CommodityPoint, the recently launched division of UtiliPoint International that is focused specifically on the global commodity trading, transaction, and risk management space, is now completing our latest report.

The report, “Changes in Commodity Marketss—Impacts on Traders and Software” will be available within days and is based upon a study undertaken by CommodityPoint during the fall and winter of 2008 to assess the impact of changes in commodity markets on traders and the software used to support trading and risk management operations. …. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Goldseek.com: The past few months have been absolutely crazy in the financial markets. Financial advisors and banks are taking a beating from both the market condition and clients as individuals around the world are losing 30+ of their investments.

We have seen oil prices drop over $110 per barrel from the high (73% decline), and the US dollar tumbled down to 71 and rebounded to 88 (23% gain) all in the mater of months. …. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Chinadigitaltimes.net: During the commodity price boom, China invested massively in Africa seeking to lock up as many raw materials as possible. Some in academia spoke confidently of China having a fifty or one hundred year strategy toward Africa.

In practice, Chinese entrepreneurs have been the first to leave when the market turned since the global decline in commodity prices accelerated with the collapse of Lehman Brothers in September 2008….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Reuters: Oil futures rose near $42 a barrel on Monday, buoyed by threats of major strikes by refinery workers in the United States and Britain, but the gains were tempered by concerns of sagging global energy demand.

Signs from OPEC late last week that it may deepen its record output cuts to stem the over $100 collapse in oil prices, and an abrupt end to a ceasefire in Nigeria’s oil rich Niger-Delta also supported oil prices, analysts said….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Timesonline.co.uk: Opec member states are struggling to maintain basic social spending as a result of the plunge in the price of oil, according to the secretary general.

Abdullah Salem el-Badri said that sliding oil prices, coupled with the global recession, had forced the governments of some of the 12 Opec countries, which include Iran, Venezuela, Nigeria, Ecuador and Angola, to slash spending on welfare programmes. …. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Asianinvestor.net: Investment in environmental technology and clean energy was a headline maker just a few months ago, on the back of high fossil fuel prices, climate change and wars in the Middle East.

Since then the credit crisis has pushed the quest for environmental alpha into the background….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Nationalpost.com: Some experts predict the $1.4 billion in the Canadian government’s main incentive program for wind farms and other renewable energy projects will dry up in ten months, far earlier than planned and just when it’s most needed.

The Canadian Wind Energy Association and the Pembina Institute, a sustainable energy think tank, say the likelihood of the subsidy funds drying up early will discourage investment in Canadian green power production just as the new U.S. government is going gung ho with incentives….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Guardian: Oil industry lobbying at the heart of the European Union has undermined efforts to tackle climate change, environmental groups are claiming.

BP is blamed for being a key architect of the Emission Trading Scheme (ETS), which has received scathing criticism in recent days as industrial groups cash in carbon credits, causing prices to plunge….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Thehindubusinessline.com: Gold futures ended sharply higher Friday reaching a three-and-half month high fuelled by flight-to-quality buying and investment demand into bullion.

Investors overall were allocating more of their portfolio money into gold instead of other asset classes such as stocks, and the move fuelled the yellow metal’s latest rally….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Mineweb.com: The recent rise in the gold price into the $900 range is indicative of the long-awaited (by gold followers at least) rerating of the yellow metal as a store of wealth - or an insurance policy if you like - in the light of the realisation that the global financial turmoil is unlikely to end soon.

Initially, once the state of the global economy became apparent to the investment community, the unprecedented speed of the market collapse took the financial world by storm and gold holdings needed to be sold along with everything else to meet other financial commitments….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Independent: It was a monumental week for the big miners as Rio Tinto sold assets, it admitted that it may have to turn to shareholders for extra capital, and talks emerged over a multi-billion investment by Chinalco, while Xstrata said it was to raise £4.1bn in a heavily discounted issue.

This was against a background of weaker commodity prices which saw the sector drag down the FTSE 100 at the end of the week….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Hardassetsinvestor.com: Both gallium arsenide and gallium nitride are used in, amongst other things, integrated circuits (chips/microchips) - especially for mobile phones, LEDs, laser diodes, photodetectors and solar cells.

Gallium nitride is, in addition, used in amplifiers for cable TV and wireless communications base stations, certain advanced transistors, highly specialized chips and, perhaps a little closer to home, specifically in the blue laser diodes used in Blu-ray DVD devices….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Bloomberg: Copper fell on the Shanghai Futures Exchange following a drop in London prices last week when China’s markets were closed for the Lunar New Year vacation.

London copper dropped 3 percent to $3,155 a metric ton last week on a declining economic outlook. Global inventory jumped 16 percent to 491,525 tons as the recession in the U.S., the world’s second-largest copper use after China, reduces demand from builders and manufacturers….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Watoday.com.au: Oleg Deripaska, the biggest shareholder of the world’s largest aluminium producer, said he expects “no more happy times” in the industry as a sluggish global economy saps demand.

Deripaska, whose stake in United Co. Rusal makes him Russia’s richest man, predicted aluminium will average $US1,600 per ton in the next seven years, compared with a current level of $US1,349. Rusal Chairman Viktor Vekselberg, in contrast, has said he’s “100% sure” the price will reach $US2,000 a ton this year….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Marketoracle.co.uk: Commodity prices, in general, are starting to feel the upward pressure of a weak U.S. dollar. The price stability in base metals, oil, corn, wheat and gold are not being created by increased global economic expansion (this will likely begin in late 2009 or early 2010), but rather from the slow rise in U.S. dollar–priced resources.

So, an analysis of the fledgling commodity bull needs to start with the primary driving factor – the dollar….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Financialadvice.co.uk: In a startling U-turn the UK government has ruled out sustained support for sterling which appears set to move to parity against the euro. The currency has been in freefall for some time and there were hopes that the UK government would make positive noises to try and alleviate the pressure on the pound.

However, Gordon Brown has suggested that the exchange rate is a matter for the “markets” and the government will not be intervening in any supporting role….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Presstv.ir: Zimbabwe’s central bank is to slash 10 zeros from its banknotes due to trouble it has caused to computer systems and among businessmen.

The Governor of the Reserve Bank of Zimbabwe, Gideon Gono, will present the first quarter of the year monetary policy statement on Monday amid calls by businesses for the slashing of zeros they say are collapsing their computers….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Reuters: The Taiwan dollar pulled back from a four-year low on foreign fund inflows in thin but volatile trade on Monday, its first trading day after the long Lunar New Year holiday, but central bank intervention tempered bigger gains.

The Taiwan dollar opened at a fresh four-year low of T$33.900 in early trade, but later moved into positive territory to trade at T$33.798 at 0206 GMT….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Jsonline.com: Every investor sooner or later bumps up against a bubble. Driven by fabulous stories, huge expectations and a lot of hype, bubbles offer an exhilarating ride - until they pop.

The 1970s commodity bubble, the 1990s tech bubble and the recent housing bubble - in each case, investors eventually regained their senses and the securities in question fell back into the rational world….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Canberratimes.com.au: The federal government needs to put up more money to help the electric power industry make the transition to emissions trading, power generators say. The federal government plans to provide $4 billion to heavy-emitting industries under its planned carbon pollution reduction scheme, due to begin by July 2010.

But the amount is not enough, a group representing coal, gas, diesel and bio-electricity generators has told a Senate inquiry hearing in Canberra….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Arabianbusiness.com: The Dubai Mercantile Exchange (DME) will complete the switch to the trading platform of the world’s largest derivatives exchange overnight, in a move the DME hopes will boost trade of its Oman oil contracts.

The DME’s contracts will trade on the US CME Group’s Globex trading platform from 3 a.m. (2300 GMT), the DME said in a statement….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Business-standard.com: Reliance Money, a Reliance Capital company and a part of the Reliance Anil Dhirubhai Ambani Group, is planning to float a stock exchange for small and medium enterprises (SME), with 26 per cent stake, and is scouting for partners to start the venture in about a year’s time.

The company is also mulling to enter the currency futures space through the exchange. Recently, the Securities and Exchange Board of India (Sebi) had issued guidelines for SME exchange, and had set a minimum net worth criteria of Rs 100 crore for entity willing to start it….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Telegraphindia.com: Multi Commodity Exchange of India Limited is keen on an exchange for trading in equities and another exclusively for small and medium enterprises.

MCX is part of Financial Technologies (India) Ltd, which has floated entities for dealing in commodity futures and currency derivatives….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Business-standard.com: The face of tea auction in India, which accounts for 53 per cent of total sales, is set to change. The electronic auction of tea would be the first in the world and there is apprehension from stakeholders as it calls for a complete overhaul of a system, which dates back to 1861.

The pilot in Kolkata is slated for introduction over the next few weeks though there is leeway up to the first week of April, which is when the new season teas would come up for sale. In South India it would be launched within a month….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From FT: Britain’s era of cheap food is gone forever with food prices forecast to remain high over the long term even as commodity prices moderate, according to a report from Chatham House, the London-based think-tank.

Recent declines in wheat and oil prices will not sharply reduce the cost of food because the underlying fundamentals driving food prices higher have not changed, it warns….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Cpim.org: While world trade prices of these foodgrains did fluctuate dramatically, and have now fallen in ways that will adversely affect exporters of these crops, retail prices of these grains have not come down in most developing country markets.

Therefore, we have a strange situation in which both the direct producers and the final consumers appear to be worse off because of the volatility….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Merinews.com: Futures market dealing in commodities are contracts, in which one party agrees to buy or sell, at a certain price at an agreed upon date in the future. In Futures, like in poker, you cannot control the deal that comes to your hand.

In poker, all the money you win comes from money that others lose. In the commodity market too, all the money you win comes from money that others lose….. Full Article: Source

Posted on 02 February 2009 by VRS |  Email |Print

From Komfie Manalo, Opalesque Asia: Hedge fund whiz David Einhorn, founder of the New York-based Greenlight Capital, has finally invested in gold, reports BusinessWeek.com.

Einhorn, who was credited for predicting the fall of Lehman Brothers and taking on Allied Capital (ALD), a commercial lender he accused of fraudulent accounting practices, has long avoided investing in gold.

But with the price of gold steadily rising since November 2008 to close at $910.70 per troy ounce on Jan-26-2009, many investors, including Einhorn, are convinced the precious metal may be the best option to protect them against a possible economic catastrophe.

Besides, the Federal Reserve’s stimulus package plan also might drive the price of gold up.

In his letter to his investors on Jan. 20, Einhorn explained why he had avoided investing in gold. He said his grandfather Benjamin, “an amateur gold bug, lost money for 30 years waiting for the U.S. currency to lose its value due to runaway inflation that never arrived.”

He said his grandfather had advised him that investing in gold and was the only “sensible” strategy against the threat of inflation and risks poised by so-called fiat currencies. “To everyone’s dismay, we believe some of Grandpa Ben’s predictions are playing out.”

In addition to buying gold, Greenlight told said it added call options on gold and the Market Vectors Gold Miners exchange-traded fund to the company’s investments.

According to Bloomberg.com, Einhorn’s $5.1b hedge fund declined 22.7% in 2008, against the Standard & Poor’s 500-stock index’s 37% drop. Another Bloomberg.com report said Greenlight had lost about 23% last year, its first annual loss, after wrong-way bets on Helix Energy Solutions Group Inc. and Volkswagen AG.

Early this month, SeekingAlpha.com reported that the superior investment skill of Einhorn and Greenlight’s long/short strategy should outperform the markets in good and bad times. 39-year-old Einhorn has had phenomenal success managing Greenlight Capital, a value-oriented hedge fund that has grown into a billion dollar firm from humble beginnings with only $1 million in assets in 1996.

Golden outlook
As of Jan. 27, the 16-company Philadelphia Stock Exchange Gold & Silver Index gained 90% in the three months while the Standard & Poor’s 500 Index fell 0.4%. Gold rose 21% in that period. Gold futures for April delivery fell $11.30, or 1.3%, to $888.20 an ounce on Wednesday (Jan. 28) on the New York Mercantile Exchange’s Comex division, said Bloomberg.com.

Richard Gray, a mining sector analyst at investment bank Blackmont Capital in Toronto Canada, forecasted gold would average $950 and trade as high as $1,100 in 2009, according BusinessWeek.com.

Gold and oil best commodities in 2009
Most analysts have predicted gold to be four digits in the face of historic redemptions and the rush for liquidity. According to CommodityOnline.com, gold continues to be one of the best performing asset classes of the decade. And while the meltdown in global markets have pulled gold prices down in November, the precious metal remains in a long-term bull market.

Overall, analysts are forecasting gold to regain the $1,000-an-ounce level this year and could substantially outperform any general stock market recovery.

Another commodity that needs a serious look at is oil which peaked to a record high $147 a barrel in July 2008 to a low $32 a barrel in December-08. But with major oil producers, particularly members of the Organization of Petroleum Exporting Countries (OPEC) having the ability to manipulate the price through production controls, MineWeb.com said, the sector will see a quick recovery from declining prices.

MineWeb.com further said the impact of cuts in oil production takes time to sink through and affect the markets and so is expecting the price of oil to double within the next few months.

Barclays Capital, one of the firms bullish on oil, forecasted oil to reach $76 a barrel for average U.S. crude in 2009.

To subscribe to Opalesque’s free daily briefing on commodities, click on ‘Commodities Briefing’ (and uncheck other options) here:
Article Source: http://www.opalesque.com/index.php?act=registration

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