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Commodities Briefing 21.Oct 2011

Posted on 21 October 2011 by VRS |  Email |Print

Global commodity exchange traded product (ETP) assets rose US$3.7bn in Q3 2011 to reach a record quarterly high of US$178.2bn, a remarkable achievement given the substantial financial and economic turbulence during the quarter.
The strong headline figure, however, masks highly divergent trends at a sector level, with precious metal ETP assets surging by US$11.8bn during the quarter and all other commodity ETP sectors seeing assets fall by US$8.1bn. Gold was in fact the only bright spot, with a combination of price gains and new investor inflows pushing gold ETP assets up US$13.7bn to a record quarter-end high of US$121.7bn……………………………………….Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

Fund managers’ attitudes toward commodities have turned negative for the first time in more than two years amid fears the world could face another recession, according to a survey.
For the first time since February 2009, managers with smaller commodity investments than dictated by their funds’ benchmarks outnumbered those with relatively bigger positions, according to a poll of 286 investment managers controlling a total of $739 billion………………………………………..Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

European Union proposals to toughen laws against market abuse in commodities would sharply broaden the definition of insider information and could expose traders on the London Metal Exchange (LME) to charges of manipulation.
“I think a lot of people will find this quite troubling,” said Chris Bates, a partner at law firm Clifford Chance who specialises in financial services regulation………………………………………..Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

The European Union is seeking limits on commodities derivatives and curbs on high-frequency trading as part of proposals to overhaul the region’s financial-market rules.
Today’s plans, which also include a crackdown on so-called dark pools, are aimed at reducing market volatility, increasing regulatory oversight and promoting competition. Specific measures include requiring national regulators to either cap the number of commodity derivative contracts that traders can enter into, or make “alternative arrangements” with the same effect………………………………………Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

As so often occurs during a crisis, a multitude of unforeseen forces are unleashed which end up making the situation much worse. Unfortunately, Europe’s sovereign debt and banking crisis is now resulting in numerous unintended consequences, especially in the commodities space.
In terms of obvious first-order effects, the marked tightening of financial conditions and the weakening growth picture in Europe is restraining demand for imports from the emerging world, especially Asia. Not surprisingly, commodities-demand has also been dragged down……………………………………….Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

Remember when Vale and BHP, two of the world’s biggest iron ore miners, changed their pricing contract methods with China and Japan? The move from annual to quarterly contracts came amid resurging Chinese demand for iron ore, which put the miners in a powerful position.
By re-setting the prices more frequently in a rising market, profits were predicted to soar, and indeed they did……………………………………….Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

The Baltic Exchange’s main sea freight index , which tracks rates to ship dry commodities, inched higher on Wednesday although a potential pullback in Chinese iron ore imports would put the put the brakes on a recent rally in the larger capesize market.
Brokers said the market was watching to see if weaker-than-expected Chinese economic data issued on Tuesday would signal a pullback in raw materials demand, which would dent the dry freight market already struggling with a glut of vessels……………………………………….Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

It’s been a bumpy, generally negative, ride for commodities in 2011. This has been particularly true for crude oil and gold, both getting whipsawed by investor sentiment and wild shifts in mood regarding the global economy. Black gold is traditionally a proxy for global growth whereas gold is a place investors turn in times of economic strife.
With both gold and crude well off their highs, the question facing investors is whether buyers are getting a value or catching a falling knife………………………………………..Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

Gold has resumed its bear strength right now; and after testing the highs of about $1660-1670 today, we have seen a big dip in gold prices. The trend is still bearish and we expect the prices to further correct about $1600 in the near term.
For copper, we are seeing a big sharp correction of prices. On the back of the economic story which is developing in France and Germany and currently the prices are close to about 350 levels which can be a good opportunity again to go short in the market with a potential target of 340. Stop loss levels should be over 356 for copper……………………………………….Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

Gold futures extended their slump for a fourth day this morning, ending at a three-week low as pessimism about a potential quick fix to the eurozone’s debt crisis had investors favouring holding cash instead of precious metals.
German Chancellor Angela Merkel cancelled a statement scheduled for today ahead of an upcoming European Union summit. The news added to worries the summit may not result in a credible deal outlining how to deploy the currency union’s rescue fund and weighed on the euro………………………………………..Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

Back on Oct. 3 I wrote a public article forecasting a major market bottom at around 1088 on the S&P 500 index. I surmised we were about to complete a five-wave move to the downside that commenced with the Bin Laden highs of 1370 in early May of this year.
The following day we bottomed at 1074 intra-day and closed over my 1088 pivot and continued higher as we all know. That brings us to the recent highs of 1233 intra-day this week, a strong 159 point rally off the 1074 lows in just a few weeks………………………………………..Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

Aluminium prices face a dampening prospect as the global economic slowdown could force banks to liquidate their metal holdings in a bid to fund other purposes.
Bank financing deals are believed to have tied up 70% of more than 4.5 million tonnes of aluminium held at LME approved warehouses. In a bank financing deal, banks buy aluminium, sells it forward and stores it in a warehouse for long periods……………………………………….Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

Aluminum inventories in China, the largest user, rebounded 30 percent in the past three weeks and analysts expect further increases as physical trading has slowed along with the nation’s economic growth.
Stockpiles were about 300,000 metric tons at the end of last week, up from a 2011 low of 230,000 metric tons on Sept 23, said Huang Fulong, head of the research department at Guangzhou KT Commodity Information & Consulting Co, citing the company’s own survey………………………………………..Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

Iron ore was the one commodity left largely unscathed in the recent market rout, until now. The price of the key industrial commodity, which is used to make steel, has slumped in recent weeks and is expected to keep dropping as demand falls on a weakening Chinese economy and fallout from the European debt crisis.
Steel mills have been cutting iron ore purchases as they curb production, while major iron ore producers such as BHP Billiton Ltd. and Rio Tinto PLC move forward with plans to ramp up output of the mineral………………………………………..Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

OPEC oil exports hiked by 280,000 barrels per day (bpd) over four weeks until September 24, 2011, according to an economic report.
The British Consultancy Oil Movements, which monitors future oil shipments, showed that shipped oil exports went up by 280,000 bpd over four weeks until September 24, the report cited the Diplomatic Center for Strategic Studies as showing……………………………………….Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

The global economic slowdown could send a dangerous signal to Opec producers to lower their investment in oil production, the International Energy Agency (IEA) has warned.
The IEA forecasts that at least US$10 trillion (Dh36.73tn) of oil industry spending is needed to keep up with global demand……………………………………….Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

OPEC should raise its crude oil output in the next quarters, says David Fyfe of the International Energy Agency (IEA). “We think there’s a market in the fourth quarter and 2012 for a little more than what OPEC is producing”, he said while addressing reporters on the last day of the IEA meeting.
The next OPEC meeting is scheduled to be held on December 14 and David refused to say whether he expected the members to decide on raising quotas at the meeting……………………………………….Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

Recently, the International Energy Agency’s Chief Economist Fatih Birol was quoted as saying, In the next 10 years, more than 90% of the growth in global oil production needs to come from MENA [Middle East and North African] countries. There are major risks if this investment doesn’t come in a timely manner.
While I agree that we need more oil production, I think we are kidding ourselves if we expect that 90% of the needed growth in global oil production will come from MENA countries. In this post, I will explain seven reasons why I think we are kidding ourselves………………………………………..Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

An expert at the International Energy Agency says it may be “many months” before Libya’s damaged oil industry can resume full production. The head of IEA’s Oil Industry and Markets Division, David Fyfe, said Thursday there are “many logistical, operational and security related challenges” to overcome in Libya.
Before the uprising, Libya produced about 1.6 million barrels of oil a day. The Bloomberg financial news service says production fell drastically, and recovered to to only 100,00 barrels per day last month………………………………………..Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

As Indians are looking for safer investments and means to protect their portfolio against inflation, the world’s largest gold consumers are increasingly becoming investors.
Consumer demand in India jumped 29% in the twelve months to Q2 2011 to 1,099 tonnes, of which bar and coin investments were 403 tonnes which rose 50% year-over-year, compared to jewellry demand which rose 19%, according to World Gold Council (WGC)……………………………………….Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

Deutsche Bank AG has promised to examine its agricultural commodity trading business to ensure Germany’s largest bank doesn’t exacerbate hunger or poverty, according to Foodwatch, which studies food-related issues.
The Berlin-based organization said in an Oct. 18 statement on its website that investment banks such as Deutsche Bank, Goldman Sachs Group Inc. and other financial companies are partly responsible for famine in some of the poorest countries as agricultural commodity “speculation” raises food prices……………………………………….Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

Asian currencies weakened as a lack of progress in resolving Europe’s debt crisis added to concern the global economic growth is slowing, prompting investors to cut holdings of emerging-market assets.
The won slipped from a one-month high after a rift emerged between France and Germany over how to enhance a bailout fund. European Union leaders will hold a summit on Oct. 23 to discuss solutions to the crisis. Thailand’s baht fell the most since January after the central bank said the economy may contract this quarter amid the nation’s worst floods in 50 years……………………………………….Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

China’s currency yuan is expected to become an important global reserve currency, although it will not challenge the US dollar’s dominant role in the international monetary system, said a US economist on Wednesday.
In the short term, the US dollar’s status in the world remains unrivaled, but in the long run, there would be a different picture if the US economy fails to support its global privilege, Barry Eighengreen, professor of Economics and Political Science at the University of California, Berkeley, said at a book discussion event at the International Monetary Fund (IMF) in Washington……………………………………….Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

The California Air Resources Board on Thursday unanimously adopted the nation’s first state-administered cap-and-trade regulations, a landmark set of air pollution controls to address climate change and help the state achieve its ambitious goals to reduce greenhouse gas emissions.
The complex market system for the first time puts a price on heat-trapping pollution by allowing California’s dirtiest industries to trade carbon credits. The rules have been years in the making, overcoming legal challenges and an aggressive oil industry-sponsored ballot initiative………………………………………..Full Article: Source

Posted on 21 October 2011 by VRS |  Email |Print

Japan has exemplary carbon credentials. It is amongst the most energy and carbon efficient economies in the world, and one of its most beautiful cities gave its name to the UN’s Kyoto Protocol.
Despite extraordinarily difficult economic and political circumstances, Japan is quietly forging ahead with initiatives that speak volumes about its dismay and disaffection for the UN-led process to deliver a global deal after the flawed Kyoto Protocol ends in 2012. Is Japan leading the way with a model that will inspire other nations to set their own courses of action, or, is it plotting a cunning escape from the bleeding edge of the UN process?………………………………………Full Article: Source

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