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Commodities Briefing 18.May 2011

Posted on 18 May 2011 by VRS |  Email |Print

Mervyn King Bank of England Governor Mervyn King said the recent surge in inflation is being driven by higher sales tax and increases in energy and import prices.
‘Although the impact on inflation of these factors is difficult to quantity with precision, it is likely that had they not occurred inflation would have been substantially lower and probably below the target,” King said in a letter to Chancellor of the Exchequer George Osborne. Inflation is likely to rise further over the next few months, he said……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Jamie DimonInvestment banks’ income from commodities rose by more than 50% year-on-year in the first quarter of 2011, providing a windfall for those firms which invested heavily in the sector last year.
Commodities revenues at the 10 largest investment banks globally jumped to $2.17bn in the three months to March this year, compared to $1.4bn for the same period in 2010, according to a report by analytics firm Coalition, an increase of 55%……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Peter Hickson of UBS believes commodity prices are likely to head lower in the next one or two months. “There is a clear sign that there are risks in emerging markets (EMs), particularly in China, that’s keeping investors cautious,” he said.
Hickson said commodity prices could decline from current levels. “Brent crude could head lower to USD 105 a barrel,” he said……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Our colleagues on the paper-side drew attention last week to the fact that silver trading in Asian hours experienced a clear pickup into the lead up to the commodity rout.
At the same time, silver turnover on the Shanghai Gold Exchange, China’s main precious metals trading hub spiked, rising 2,837 per cent from the start of this year to a peak of 70m ounces on April 26, according to exchange data. The number of contracts outstanding, an indicator of investor exposure, doubled over the same period……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Expectations that buoyant Chinese demand will drive commodity prices ever higher have been looking increasingly shaky, according to Capital Economics in London. For a start, China’s imports of many key commodities have actually been falling in recent months, partly due to a cyclical downturn.
But in addition to this, there are solid structural reasons why China’s demand is likely to disappoint over the coming years……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Commodities have fallen a lot, but if Chinese growth were to decelerate, they would really crater. SocGen’s Cross Asset Research team explains:
Hard commodities will fall apart if China starts to slow in H2 11. For example, early in 2011, we already saw a dramatic fall-off in Chinese appetite for copper although prices remained high due to continued production issues. Contrastingly, agricultural demand from China is likely to protect soft commodities better from a fall in prices as demand is still trending higher……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Martin Hutchinson writes: If you read the newly released United Nations report on global population trends, you can reach only one conclusion about the long-term outlook for global commodity prices. They’re going higher.
Much higher. In its report, “2010 Revision of World Population Prospects,” published May 3, the UN now estimates that the global population will reach 9.3 billion in 2050, which is an increase of 150 million from the 9.15 billion it projected in its 2008 forecast……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Oil is likely to be scarce in the world market in the near future following a rapid increase in demand in emerging economies and a decrease in supply, the International Monetary Fund (IMF) has warned.
The IMF’s latest World Economic Outlook (WEO) report indicates that increases in oil prices suggest that the global oil market has entered a period of increased scarcity caused mainly by increased demand in emerging economies. The IMF says policymakers should take precautionary measures by ensuring the current policy frameworks are ready for changes and risks brought about by the scarcity……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Overall gasoline demand in the U.S. market in 2011 is expected to decline 1.5 percent compared with 2010, the IEA said. Gasoline prices in most U.S. markets are hovering around $4 per gallon in part because of modest economic recovery and conflict in the Middle East.
The International Energy Agency states that if gasoline prices remain high, demand should fall compared with 2010 even when considering seasonal spikes during the upcoming summer driving season……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Can investing in commodities insure your money during financial crisis? The recent plunge in several commodities led by gold, silver and crude oil have turned the futures trading market volatile across the globe. And people are beginning to doubt if commodities are the best bet to insulate their investment.
In the last few years, investors have parked funds in commodities as a safe diversification strategy.
Experts say while commodities still continue to give good returns to investors, the unnatural surge in the prices of certain commodities should be always seen with caution and care……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Gold is expected to continue rising despite occasional corrections and may exceed $ 1,600 by end of 2011 due to the slow recovery from the effects of the global financial crisis and the unclear future of the political situation in the Middle East.
According to the World Gold Council, European central banks - which for two decades had been selling gold - have virtually stopped sales in the wake of the financial and European sovereign debt crises………………………………………Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Gold prices were generally range bound between $1525 and $1480 during last week as the US dollar extended its recent gains. Commodities remained weak even though selling momentum eased a bit. Crude oil prices continued to slide and silver dipped to a new low. The CRB commodities index also extended recent declines and fell as low as 333.50.
Now that the price of gold has dropped by around $85 an ounce, many market participants are suggesting that gold was in a bubble just as it was in 1980 - and is headed much lower……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

In late 1973 and early 1974, the Hunt brothers bought about 55 million ounces of silver. The commodity cost around US$3 to US$4 an ounce at the time. The two next physically moved that haul to Switzerland on fears of Uncle Sam. They thought the government would seize silver much like it did gold in the 1930s.
The brothers continued buying over the years. And in 1979, they partnered up with some Saudi sheiks to set up Investment Company Ltd., a Bermuda-based business……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Gold and silver are not the only precious metals. In fact, if price were the only determining factor, platinum is clearly the most precious of the three. Presently an ounce of platinum is some $285 more expensive than an ounce of gold, and not too long ago the difference was $1000. But there are factors other than price that need to be considered.
For example, platinum does not have any history as money. Gold is money, and silver has both a monetary and industrial demand……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Zinc failed to escape the commodity price plunge in early May as the sell-off was felt across world markets. Zinc prices were up slightly this past Friday at US$ 2,179/tonne on the London Metals Exchange (LME) after bottoming out at US$ 2,048/tonne on May 6th, their lowest levels since November, and dipping again on Wednesday the 11th.
Though escaping the same kind of carnage experienced by silver, zinc, like most other commodities, was impacted as speculators appeared leery at the prospect of US growth and global concerns over rising inflation rates……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Heightened global demand for vanadium, especially from China, is prompting the global steel industry to aggressively seek out new supplies, especially in the US where this 21st century metal is becoming increasingly indispensible. Even US President Obama is championing this metal’s promise for green energy applications.
Currently the US imports virtually all of its vanadium needs, which is critical for domestic production of high quality steel including specialty steels for aerospace and military applications, while it also enables the mass storage of renewable energy and powers the next-generation of lithium batteries……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Speculators exited bullish positions in U.S. futures and options metals markets as sharp drops in prices likely spurred selling, according to U.S. government data.
In all precious and base metals futures and options positions combined at the New York Mercantile Exchange and its Comex division, speculative traders cut long positions, according to the Commodity Futures Trading Commission’s weekly commitment of traders report. The data is of May 10. The result meant a drop in the net-long position for these types of traders in the disaggregated report and for nearly all markets in the agency’s legacy report……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Despite astonishing falls in commodity prices in recent weeks, investors’ appetite for exchange-traded commodity funds continues to eclipse their interest in alternative products.
They still hope the funds will deliver them a low-cost means of tracking the massive bounce in the commodity markets during the economic recovery. Even after the worst sell-off in years threw commodities sharply down the curve, gold resurfaced at a price of over $1,500 per ounce, which only last month was still an all-time high……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

While broad metals-related commodities ETFs are following stocks down on Tuesday, agricultural commodities funds are managing to remain on positive ground.
The most popular of the group, the PowerShares DB Agriculture Fund (DBA), is up more than 1% so far……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Billionaire investor George Soros sold most of his holdings in the bullion-backed SPDR Gold Trust and iShares Gold Trust (IAU) funds in the first quarter and bought shares of mining companies Goldcorp Inc. and Freeport-McMoRan Copper & Gold Inc. (FCX), a government filing shows.
Soros Fund Management LLC held 49,400 shares of SPDR Gold Trust as of March 31, compared with 4.721 million at the end of the fourth quarter, the filing today with the U.S. Securities and Exchange Commission showed……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

A new commodity exchange has begun its first day of trading in Hong Kong as the Asian city attempts to challenge established markets in Europe and the U.S.
Trading began at 8 a.m. Wednesday on the Hong Kong Mercantile Exchange. So far the only product available to trade is a gold futures contract for 1 kilogram of gold……………………………………….Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

Trading of commodity derivatives off exchanges rose 2 percent in the last six months of 2010 on gains in forwards and swaps contracts on precious metals, according to the Bank for International Settlements.
Over-the-counter commodity contracts were worth $2.92 trillion at the end of December, up from $2.85 trillion six months earlier, according to a BIS report………………………………………Full Article: Source

Posted on 18 May 2011 by VRS |  Email |Print

The UK’s energy secretary has announced plans to cut the UK’s carbon emissions in half by 2027 and change the way Britain produces energy. Chris Huhne, who has been facing allegations he asked his estranged wife to accept speeding penalty points on his behalf, told the Commons the proposals would promote a greener Britain.
But there are concerns that it could affect economic growth……………………………………….Full Article: Source

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