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Commodities Briefing 17.Oct 2011

Posted on 17 October 2011 by VRS |  Email |Print

Brett HammondSpeculators boosted their wagers on higher commodity prices for the first time in five weeks as increasing confidence that the global economy will avoid another recession spurred the biggest rally of the year.
Money managers boosted combined net-long positions across 18 U.S. futures and options by 0.2 percent to 656,691 contracts in the week ended Oct. 11, Commodity Futures Trading Commission data show………………………………………Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

Commodity prices moved up with the rally in equities as the US Federal Reserve hinted at the possibility of a third round of quantitative easing to boost economic growth. Moreover, the green signal from Slovakia, the last Euro nation to vote on the enhanced European bailout fund, also boosted sentiment.
From the base metal space, copper and lead were the biggest gainers after data showed that Chinese imports had reached a 16-month high in September, easing previous concerns over a demand slowdown. From the agri basket, wheat prices rose following the rebound in corn on speculation of a rise in demand from livestock……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

Last week, the Chicago Mercantile Exchange, the world’s largest derivatives market, unveiled a range of new services that will allow its member firms to trade faster than ever on its market. The announcement underlines the increasing desire among high speed trading firms, known as high frequency traders, to diversify into a range of new asset classes – the latest being commodities.
High frequency trading firms use sophisticated algorithms to exploit temporary pricing differences across markets……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

Investment banks have begun cutting commodities teams in anticipation of sharp losses brought about by falling prices. Sources close to Barclays Capital, Standard Bank, UBS and Societe Generale have said commodities-related staff have been axed from each bank in recent weeks.
Pau Morilla-Giner, a partner at fund manager London & Capital, said: “Investment banks are posting pretty dismal numbers for their trading departments, so pressure to reduce costs must be on big time. I hear about heads of desks at banks forced to reduce costs by 30% by year end.”………………………………………Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

There has been further confirmation in the past couple of days that when you look across the broad range of resource commodities, coking coal is the place to be to protect against the softness being experienced by the rest of the pack due to euro-zone debt concerns.
UBS has upgraded its near-term coking coal forecasts by 3-10 per cent (its forecast for the first quarter of next year is now $US230 a tonne), citing a combination of labour disputes in the world’s main source of supply, BHP Billiton’s Bowen Basin mines, the threat of another big wet there come December, and general global production constraints on the steel-making raw material……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

The European Union is pushing for position limits on commodity derivatives and for restrictions on high-frequency trading. The regulations are included in proposals from the EU’s executive arm, the European Commission, that are expected to be released later this week.
The proposals include limits on the number of commodity derivative contracts market members can enter into, Bloomberg News reported late Friday, citing copies of the proposals the news service said it had obtained……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

The Common Agricultural Policy, the EU’s programme funnelling taxpayer support to farmers, is once again under scrutiny after the European Commission on Wednesday released new plans for its reform.
It is by no means the first time that policymakers have overhauled the scheme, created with the aim of avoiding a repeat of the food shortages seen after the Second World War……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

Are global commodity markets on way to recovery? It may be a little too early to assert; but indications are that the market has discounted or priced in all uncertainties so far.
Last week the oil market gained following renewed hope that the European economic woes may be addressed. For the same reason, the base metals complex rebounded on what experts described as cautious optimism. The LME week sentiment was more upbeat than expected. Investor interest in precious metals seemed to stabilise and physical market demand was supportive as evidenced by prices regaining some lost ground……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

Demand for gold exchange traded funds (ETF) in India is likely to “explode” as investors get accustomed to “click-and-park” mode of investing, shying away from sagging stock markets and as high inflation eats into bank savings, a trade body head told Reuters on Thursday.
“Clearly people are seeing convenience in the form of ETF, going through the same broker which he has for equities,” said Ajay Mitra, managing director - India and the Middle East, World Gold Council (WGC………………………………………Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

Gold prices present a good opportunity for long-term investors to accumulate the precious metal as its overall outlook remains positive amid the current economic uncertainty.
Gold prices, which had collapsed in the last week of September, have recovered significantly and are now hovering around Rs 27,000 per ten grams. Going forward, fresh buying by stockists and jewellers to meet the ongoing festival demand is likely to further fuel the uptrend………………………………………Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

Gold prices are expected to scale record highs next year as the asset’s bullish fundamentals trump the current macroeconomic uncertainty that led to a recent selloff in the precious metal, says a commodities fund manager.
The slump in gold last month has resulted in a “wash-out” of speculators in favour of more stable long-term buyers like exchange-traded funds and central banks, said Diego Parilla, chief investment officer of new Singapore-based commodities hedge fund NARECO Advisors……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

As to the current effect on the gold price, right around when this happened gold topped and started to sell off. I don’t think they are directly related, but I think it is psychological. If the Swiss franc holds at 1.20 to the euro, if a hedge fund or a corporation hits the Swiss National Bank with a billion euros, it is no big deal.
But what about 10 billion, 100 billion, even a trillion? Then it starts becoming a big deal. At some point does Switzerland have to start selling its gold reserves to continue this lunacy?……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

Strong physical Gold demand from Asia amidst the backdrop of European debt crisis is expected to average gold prices at around $1875/ounce, says Barclays Capital in a research report.
$1600 levels may prove to be a strong support and cushion from which prices might shoot up……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

BNP Paribas cut its gold price forecasts for 2011 through 2013, following the recent pullback in the precious metal’s prices and said a further correction may be possible in the near term.
The brokerage said another episode of extreme risk aversion in the short term could potentially see gold correct further from its current level, as its sales offset losses in other asset classes……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

According to Edward Karr, CEO of RAMPartners, the band is tuning up and the guests are just starting to arrive. Instead of selling before the party really gets going, he advises keeping a “decent percentage” of cash to take advantage of opportunities to buy both physical Gold and junior mining stocks.
I think the logical explanation for falling prices is that gold is a relatively liquid asset. Governments, hedge fund managers, bankers and individuals are all facing a severe cash crisis……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

Gold’s biggest slump in three years means traders and analysts are now the most bullish in three months, speculating that Europe’s debt crisis, slowing growth and a bear market in equities will drive demand for bullion.
Twenty-two of 25 people surveyed by Bloomberg expect the metal to rise next week, the highest proportion since mid-July……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

It is a buying opportunity for silver. The white metal, which rose at more than twice the rate of gold last year, should continue to outperform its more lustrous peer, say analysts. In the process, it has narrowed its long term gap with gold, known as the gold-silver ratio, although this is currently well above the level it fell to earlier in the year.
The gold to silver ratio measures the relative value of the two precious metals. The higher the ratio, the more expensive gold is relative to silver. On the other hand, the lower the ratio, the more expensive silver is relative to gold……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

Crude Oil prices have fallen from their highs on concerns of a global economic slowdown. However, a negative macro-economic outlook does not warrant opening short positions in crude oil.
Though shorting crude oil may seem a natural trade in view of the possibility of world wide economic contraction, one has to consider the following factors………………………………………Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

A series of encouraging economic reports sparked oil prices Friday, pushing the benchmark to the highest level in nearly a month.
Investors shrugged off declining oil demand forecasts that came out earlier this week and focused instead on growing U.S. consumer spending, a rise in bank lending in China and a meeting of world leaders to discuss Europe’s debt crisis……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

Global oil demand has never been higher, despite recent revisions. Demand is driven by growth in Asia, the Middle East, Latin America and FSU, while requirements in North America and EU are contracting in 2011 as well as in 2012.
The IEA has revised down its demand outlook by 0.2 million barrels per day (mb/d) for 2011 to reach 89.3 and by 0.4 mb/d for 2012 to reach 90.7. Growth outlook now stands at a modest 1.1% in 2011 and 1.6% in 2012……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

Hong Kong has become the world’s first place to offer gold trading in yuan, cementing its status as an offshore hub for the Chinese currency.
The Chinese Gold & Silver Exchange Society (CGSE) said it will offer offshore renminbi-denominated spot gold contracts to investors. The move comes amid a push by Chinese authorities for a more international role for its currency. Hong Kong is the world’s third-largest gold trading centre……………………………………….Full Article: Source

Posted on 17 October 2011 by VRS |  Email |Print

All four BRIC currencies - the Brazilian real, Russian rouble, Indian rupee and Chinese yuan - will recoup at least some of their recent heavy losses over the next 12 months, a Reuters poll showed on Wednesday.
The latest Reuters BRIC FX survey showed the real, rouble and rupee recovering slowly after diving more than 10 percent against the dollar over the last three months, as low borrowing rates in sluggish developed economies force investors to seek yield in dynamic emerging markets……………………………………….Full Article: Source

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