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Commodities Briefing 26.Oct 2011

Posted on 26 October 2011 by VRS |  Email |Print

While the global commodity markets turned considerably lower during the third quarter of 2011, I do not believe that a sustained drop in commodity prices is likely.

Worldwide demographic trends will continue to place supply pressures on several commodity types, notably food and energy, while increased market volatility will likely result in continued investor appetites for precious metals………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

Emerging markets have been a buzz phrase for so long that the absence of news about countries such as Brazil, China and India, is cause for alarm. While developed countries in Europe and the United States have struggled to kick start GDP growth in the wake of the financial crisis, developing countries have been chugging along.

Developing countries have some big advantages when it comes to modernizing their economies………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

The latest study from the Edhec-Risk Institute tackles the issue of whether investing in commodities for financial gain has caused greater volatility and a decade long rise in commodity prices over recent years.

The study, entitled ‘Long-Short Commodity Investing: Implications for Portfolio Risk and Market Regulation’ and authored by EDHEC-Risk Institute Professor Jolle Miffre was produced with market data and support from CME Group. It also sought to clarify whether increased use of commodities as investment tools has caused them to lose their traditional strength of non-correlation with financial investments………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

Commodity markets are starting to reach short-term support levels but Citi has warned that volatility will continue, transforming the way the market is priced.

Heath Jansen, Citi’s European head of metals and mining research, said most commodities reached reasonable support levels over the past two weeks following the volatility of the past months………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

The empires and periodic invasions of yesteryear are long gone, but Europe still has a talent for fomenting global crises. That applies to commodities—though not necessarily because of the Old Continent’s absolute demand.

In 2005, the euro zone’s current members burned 11.5 million barrels of oil a day, or 13.6% of global demand, according to the U.S. Department of Energy. Come 2010, as the euro zone slipped into an existential funk, oil demand was down to 10.6 million barrels a day, or 12.1%………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

For those who believe that a build-up in long positions by money managers was responsible for fuelling the 2008 record rally in commodities, the above seems to suggest that it was also the slashing of the long open interest, alongside a build up in short positioning, which may have fueled the 2008 commodities crash — but only once the last short squeezes were fully eliminiated from the market.

SemGroup’s role as one of the last remaining shorts to be squeezed from the market has, for example, been well documented………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

Below are trading range charts for 10 major commodities from the Bespoke Group. All 10 commodities are currently at or below the bottom of their trading ranges, which would suggest at the moment, a good opportunity to get in at oversold levels for investors looking to gain long-term exposure.
However, U.S. dollar has been strengthening as investors fled the Euro debt and financial crisis seeking safety in the dollar. Since most commodities are priced in dollar, dollar movement will have considerable impact on commodity prices………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

The September Chinese trade data, combined with improving evidence from the macro front for October (a rebound in PMI and expansionary indications in the manufacturing sector), are in line with Barclays’ soft landing assumptions, as the bank continues to grow more positive on the outlook for China’s commodity import demand over the remainder of the year.

The report from Barclays paints an encouraging picture of China and eschews fears of a hard landing by the economy………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

China’s thirst for oil will squeeze prices higher and destroy demand in developed economies if world oil supply growth does not exceed current trends, said senior commodity fund managers who did not expect fast oil output rises in Libya and Iraq.

“In the last 12 months China’s demand for diesel for power generation has been one of the major drivers (of the market),” Tony Hall, chief investment officer of the Duet Commodities Fund, said at a conference in London on Tuesday………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

Libyan Colonel Gaddafi’s 42 year brutal reign is over, but the future looks murky ahead for a country primarily known for exporting oil and terrorism. One thing is for certain - international oil companies will be packing out flights to Tripoli to cut deals for a piece of the action.

Libya remains the wild card, with only 25 percent of the country’s oil potential territory explored………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

From ancient civilizations through the modern era, gold has been the world’s currency of choice. Today, investors buy gold mainly as a hedge against political unrest and inflation. In addition, many top investment advisors recommend a portfolio allocation in commodities, including gold, in order to lower overall portfolio risk.

We’ll cover many of the opportunities for investing in gold, including bullion (i.e. gold bars), mutual funds, futures, mining companies and jewelry. With few exceptions, only bullion, futures and a handful of specialty funds provide a direct investment opportunity in gold. Other investments gain part of their value from other sources………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

Gold topped $1,700 per troy ounce Tuesday as equities sank with reports that a major policy announcement in Europe would be delayed.

European Union finance ministers canceled a meeting that was to include all 27 finance leaders from EU nations. The cancellation means heads of state gathering for Wednesday’s summit will be empty-handed when it comes to a detailed program for recapitalizing Europe’s banks and restructuring Greek debt………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

Gold could “easily” rise to $2,200 an ounce in the next two years as costs increase and global financial concerns persist, said the chief executive officer of AngloGold Ashanti Ltd. (AU), the third-largest producer of the metal.

“It costs almost $1,200 to produce an ounce of gold,” Mark Cutifani said at a conference in Perth today. “The gold price probably reflects the fundamentals of the industry.”……………………………………….Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

If any more proof was needed about India’s craze for gold, one just has to look at sales in just one city for just one day. Nearly 35 kilograms of gold was sold on a single day on Monday, earning more than $1.8 billion for traders on the highly auspicious Dhanteras, the day preceding Diwali.

Even as Indians get ready to celebrate the festival of lights Diwali on Wednesday, October 26, the people of Chandigarh in Punjab have shown the intensity with which the yellow metal continues to be revered in the country by buying up massive quantities of gold on Monday……………………………………….Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

Here in South Africa, quarterly gold results are due from Harmony and DRD Gold in the next week but, in the current economic climate, investors and analysts remain cautious. And, the apparent disconnect between the bullion price, profit margins and the gold equity prices is symptomatic of this.

Whilst the US dollar/oz gold price has increased 185% over the last five years, Harmony’s share price over a similar period has decreased by 24%. Even more severely affected, DRD Gold has decreased by 60% over a comparative period……………………………………….Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

Gold ETFs have become some of the most popular options for investors to make a speculative play on their favorite precious metal. With unparalleled transparency, rock bottom fees, and superior liquidity, the exchange-traded structure has emerged in recent years as the vehicle of choice for all types of investors–from novices up to sophisticated hedge fund managers–to establish exposure to precious metals.

While gold has been boosted by bullish sentiment for much of the last few years, recent developments have heightened concerns about a bubble in the space……………………………………….Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

Spot iron ore prices fell nearly 4 percent in their biggest single-day drop since August 2009 as thin demand from top buyer China forced some traders to sell at a loss as offers dropped further on Tuesday.

Iron ore prices have shed 19 percent so far this month, the steepest monthly decline since October 2008, in a sell-off largely fueled by slower construction steel demand in China………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

Harold Bradley and Bob Litan made some very good points about ETFs in their Congressional testimony last week — testimony which Paul Amery today greets as “a mixed bag”. But it’s hard to argue with this:
We have enough history with financial innovations to at least raise questions when we see an innovation growing at very rapid rates. ETFs are no exception………………………………………..Full Article: Source

Posted on 26 October 2011 by VRS |  Email |Print

Deutsche Bank reported record-beating performance in commodities trading in the third quarter as it grabbed business from U.S. and European rival despite some of the sharpest falls in commodities prices since the 2008 financial crisis.
Deutsche has cemented a leading role among the biggest players in commodities in recent years, and bankers say it trails only Goldman Sachs and JP Morgan and is on par with Morgan Stanley and Barclays……………………………………….Full Article: Source

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